Still, Noah Hamman, CEO of the ETF manager AdvisorShares, is bullish on the sector.
“We think it has been significantly oversold,” Hamman told Yahoo Finance’s “The First Trade.”
His firm runs the AdvisorShares Pure Cannabis ETF (YOLO), which bills itself as the only actively managed ETF in the United States focused on the cannabis sector. Because of the nature of the legal cannabis industry, a majority of its holdings are based in Canada, which has been taking steps to expand its market.
Just this week, Canadian regulators began accepting applications for companies to produce legal cannabis edibles and beverages, one year after other forms of marijuana became legal there. Hamman says that’s a good sign for the burgeoning industry, along with progress here in the U.S. to pass the Safe Banking Act. That law would allow banks to handle money from companies involved in legal cannabis without running afoul of federal drug restrictions.
“Each one of those things are signs that tell you that space is becoming more mainstream,” Hamman said. “More companies are going to be looking at it from an M&A perspective, and we think it’s going to provide some interesting returns for investors in the future.”
Still, he advocates taking a balanced approach. The cannabis market will remain volatile with each step forward toward full legalization.
“It’s certainly the early, early days,” Hamman said. “There’s a lot more regulatory changes that are coming into play, a lot more legalization that has to come into play, but it’s been an area that we’ve made an allocation to in our portfolio for sure that we think is going to provide significant upside.”