Nanalyze

How to Invest in the First Marijuana ETF – HMMJ

Ever since we published our first article warning about the dangers of marijuana stocks, people have been asking us two questions. The first question is “how can I buy marijuana stocks” and the second question is “which marijuana stocks should I buy“? We always suggest that eager investors should invest a majority of their funds in something safer, and be sure to stay clear of over-the-counter (OTC) stocks. Instead, look at the medical marijuana stocks that trade on major U.S. exchanges, or alternatively, consider buying the single biggest producer of marijuana in Canada by a long margin which is Canopy Growth (TSE:WEED). Since our last article on WEED, we came across the ideal way for budding cannabis investors to get some skin in the game which is to pick up shares in the first marijuana ETF ever. In order to celebrate 4/20, we’re going to show you how to buy shares in that marijuana ETF by doing it right here and now for everyone to see. The ETF in question is called the “Horizon Medical Marijuana Life Sciences ETF” and it trades on the Toronto Stock Exchange (TSE:HMMJ) as seen below:

Now there are a few things we’ve highlighted above which we want to discuss but first let’s start with the basics. An Exchange Traded Fund (ETF) is a basket of stocks that you can buy and sell just like you would a single stock. Investors like ETFs because they provide diversification which means you are less likely to lose all your money by owning a group of stocks rather than just investing in a single stock. Who picks the stocks in the ETF basket? Typically you will have an index provider who builds an “index” which is a collection of stocks like the S&P 500. The ETF then tracks the performance of the index. The index that HMMJ is tracking is called the “North American Medical Marijuana Index”.

Moving on to what we highlighted in the above picture:

  • Net AssetsThis is how much money people have put into the ETF presently
  • ExchangeThis trades on the Toronto Stock Exchange which presents a problem for our U.S. readers
  • Management FeeThis is how much they charge you for investing in the ETF. It’s all behind the scenes but it affects the performance of the ETF. The fee for HMMJ is .75% or 75 basis points which is high, eh. But most of you are high too, so you probably won’t give a isht and they know that.
  • CurrencyThis means you need Canadian dollars to buy the ETF. Where can you possibly get Canadian dollars from? Don’t worry, we’ll sort you out.

Now before you go buying anything, don’t you want to know what you’re actually buying here? Based on most of the conversations we’ve had on our Facebook page, probably not, but we’re going to dig into this anyway. Here is the list of stocks that HMMJ holds:

So when you buy the Horizon Medical Marijuana Life Sciences ETF, you’re buying fractional shares in all those stocks you see above. For example, if you invested $1,000 into this ETF then you would own $99.50 worth of Aphria shares, $99.50 worth of Aurora Cannabis shares, $99.50 worth of Canopy growth shares, etc. etc. Most of these stocks we’ve covered before and here’s what each one does:

 Aphria Inc. – 9.95% (TSE:APH) Grower
 Aurora Cannabis Inc. – 9.95% (CVE:ACB) Grower
 Canopy Growth Corp. – 9.95% (TSE:WEED) Grower
 Insys Therapeutics Inc. – 9.95% (NASDAQ: INSY) Medical Marijuana
 Scotts Miracle-Gro Co. – 9.95% (NYSE:SMG) Big Azz Fertilizer Company
 GW Pharmaceuticals PLC – 9.89% (NASDAQ:GWPH) Medical Marijuana
 Zynerba Pharmaceuticals Inc. – 8.45% (NASDAQ:ZYNE) Medical Marijuana
 Cronos Group Inc. – 8.02% (CVE:MJN) Grower
 CanniMed Therapeutics Inc. – 5.56% (TSE:CMED) Products
 OrganiGram Holdings Inc. – 5.38% (CVE:OGI) Grower
 Supreme Pharmaceuticals Inc. – 4.70% (CNSX:SL) Grower
 Emblem Corp. – 3.79% (CVE:EMC) Grower
Emerald Health Therapeutics Inc. – 2.31% (CVE:EMH) Grower
 ICC International Cannabis Cor. – 2.10% (CVE:ICC) Products

Do you notice one thing about this ETF? There are no over-the-counter (OTC) stocks anywhere to be seen. That’s because sophisticated investors, or investors with common sense, stay well clear of OTC garbage. Most of the above stocks fall into our original list of 57 marijuana stocks and we’re glad to see lots of representation from the growers in the top of the list. Everything looks good so let’s set our retirement plans in action and get rich ASAP.

The first thing we need to do is login into our Interactive Brokers Account. If you haven’t opened one yet, you’ll want to read our review of Interactive Brokers which we consider to be the single best brokerage out there for advanced retail investors. Go ahead and open an account if you want to play along. We’ll wait.

Now the first thing we need are some Canadian dollars. We’re going to keep this simple and try to buy 100 shares of HMMJ. (If you want to buy 200 shares, just double everything. 300 shares, triple everything. Etc.) Looks like HMMJ is trading at around $10.69 a share in Canadian dollars so let’s buy 1100 Canadian dollars just to be sure we have enough to cover our trade. Check out the below order screen with artisinal annotations from one of our half-baked MBAs:

This is where isht gets confusing. Aren’t we buying Canadian dollars, not selling them? Actually, we’re choosing what’s called a “currency pair” which is USD/CAD. This means if we SELL the USD/CAD currency pair then we are selling U.S. dollars to buy Canadian dollars. That’s what we want – to buy Canadian dollars. How many U.S. dollars do we sell? Just go to www.xe.com and then translate $1,100 CAD to USD and you will get $816.91 at today’s foreign exchange rates. So we’re going to round that up and sell $817 crisp U.S. dollars as seen below:

The fee for that is $2.50 USD. Note that you will not pay more than that if you increase that to say $10,000 U.S. dollars. They will still charge you just $2.50 which is an excellent deal. Once you click “Submit Order”, you will then have your Canadian dollars when the order goes through.

Now we need to buy HMMJ. We fill out the order screen as follows:

Then we submit the order. Now there may be a chance that the order just sits there like this:

That’s because the system automatically created a limit order of $10.70 which says that is all we are willing to pay. The problem is, people are asking a different price (it’s always more because if it was less then we would have been able to buy them). So then you need to sit there like we did and look like a total tool as you slowly increment the price penny by penny upwards while some broker sits on the other end laughing his azz off and raising the price slowly to see how high you’ll bid up. Actually, we’re just joking about that last part. That broker has probably been replaced already by an artificial intelligence algorithm that doesn’t have a sense of humor.

So anyways, you don’t have to do that at all and can just wait to see if your order fills over time (stock prices fluctuate all the time) but we have no patience and needed to get this article out to you on 4/20 so we had a good laugh about the whole thing and ended up paying $10.79 per share as seen below:

So you see we now hold 100 shares of HMMJ which are priced in Canadian dollars so we now have exposure to the Canadian dollar in our portfolio. This will help hedge weaknesses in the U.S. dollar but that’s all too complicated to think about so let’s just go figure out how we’re going to spend all that money we’re going to make off marijuana stocks.

If you get stuck anywhere in that process, it may be because we were too stoned focused on taking screenshots and missed something. You can then try and deal with the IB customer support hotline (it could be John in Mumbai, we’re just not sure) or you can drop us a line and one of our MBAs can provide you with a “tactical investment consultation” that will cost you a ridiculous amount of money and then she’ll spend most of the time trying to sell you other financial products using lots of two-by-twos like this one:

H/t to Uttam Jain

We hope that you’ve learned something about investing today and that you won’t just limit your portfolio to investing in “marijuana stocks”. Not only are there some incredible technologies out there like artificial intelligence or synthetic biology that you should keep an eye on but there’s also the tried and true way of investing in boring old dividend growth stocks like Warren Buffet who just might be the world’s first trillionaire. That’s the real secret to getting wealthy, boring old dividend growth stocks and time.

Do you have some cash laying around that is doing nothing? Sign up for a CIT Bank high-yield savings account. Their saving account pays an astounding +1.35% per year. To put this in perspective, the best dividend stocks out there pay 2.5-3.5%. You're getting paid +1.35% with zero risk and you can withdraw at any time. We opened up a savings account with CIT Bank and so should you. Click here to get started.

  • MAURICE R. CHEVALIER

    Thank you so much for your explanation on how to buy Marijuana stocks and the “ETF”. It is very well explained and easy to understand/follow.

    I have a situation that needs clarification. I have a “Self Directed IRA” with Jp Morgan Chase – CHASE BANK.
    Have had it since 2001. On 04/07/2017 I made a purchase of 144 shares of HMMJ.TO at $8.10 (USD) pershare.
    The trade was confirmed with a settlement date of 04/12/2017- The settlement was made and my portfolio showed the transaction and listed the stock. On 04/19/2017 I was informed by a JP Morgan – Chase Bank –
    Financial Consultant that the trade was “ILLEGAL” and that it is being canceled, and the funds were being put back in the MM of my account.

    I challenged their action, in that I had not been informed. That the shares should have ben sold due to the increase in price (04/07/17 @ $8.04 and 04/19/17 @ $10.80. An increase of $2.76 x 144 = $397.44, a profit
    that would/should have been added to my account. Can you clarify it being ILLEGAL to buy in the U.S.A.?

    For your info, I have filed a complaint with the SEC.

    Thank you for your time and response.

    V/R
    Maurice R. Chevalier
    cmauricer@aol.com

    • Nanalyze

      Thank you very much for the note Maurice.

      This is very alarming news and the first time we have heard of this. Many people have raised the “legality” of buying Canadian stocks with a U.S. account and not once has anyone mentioned a situation like this. That’s great that you posted it for others to see.

      In the example we just gave, we used an Interactive Brokerage account of a U.S. citizen though I’m not sure where he opened that (he lives outside the U.S. now). We can look into that. It is highly unlikely that buying a Canadian ETF on the Canadian exchange using Canadian dollars would be “illegal” somehow.

      Regarding the “cancellation of the trade”, the treatment is expected. If a trade is null and void for whatever reason it then you need to treat it as if it never happened.

      Please keep us all posted on what Chase or the SEC has to say!

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