The model was launched in March 2017 targeting long-term investors seeking to invest in leading cannabis stocks with low portfolio turnover and has gained 227.2% since inception compared to the 49.2% decline in the index since then.
After a strong rally to begin 2019, the cannabis sector experienced a sharp decline over the next year to unprecedented levels due to several negative developments, including the CannTrust fraud, the surprise termination of Bruce Linton as CEO of Canopy Growth, a disappointing roll-out of legalization in Canada, regulatory confusion in the U.S.
Cannabis stocks overreacted and put in a bottom in March 2020, and benefited from a perception that the industry offers strong growth prospects, something that wasn’t clear then.
The strong finish to 2020 continued into 2021 after the Democrats took control of the Senate in early January, but the stocks got way ahead of themselves and have been consolidating since then.
There are several potential catalysts ahead, including the FDA providing clarity on CBD regulation, progress in the Canadian legalization that commenced in October 2018 and that is beginning to include a broader set of products and the continued growth in German and Israeli MMJ and other international markets that have been slow to develop.
The sector has transitioned away from many legacy penny stocks that had never proven that they had viable businesses towards better capitalized companies, many of which have strong management teams and substantial businesses.