ETFMG Alternative Harvest and AdvisorShares Pure Cannabis may track the same industry, but they are quite different in terms of holdings
A burning desire for pot stocks may leave unwary cannabis investors with more speculative investments than they realize.
Take two exchange-traded funds focused on the cannabis industry: ETFMG Alternative Harvest (MJ) and the recently launched AdvisorShares Pure Cannabis (YOLO). While they both purport to track the same industry, they are actually quite different.
“One is much broader and expansive; the other one is at the extreme end of what is already extreme,” says Ben Johnson, director of global ETF research at Morningstar. “Less than half of their holdings are common across the two portfolios.”
More specifically, the Alternative Harvest fund includes companies that will indirectly prosper from the cannabis industry, such as plant-food firm Scotts Miracle-Gro SMG -0.99% and tobacco companies such as Philip Morris International . PM -0.21% Both are leaders in their fields and could quickly profit from the burgeoning marijuana business.
“We want to own everything in the space because trying to pick winners is extremely difficult,” says Chris Yeagley, managing partner of Prime Indexes—the index provider for the AH fund. He likens it to investing in the 1848-1855 California gold rush, where some miners did well, but so did the sellers of picks and shovels, the tools required for mining.