Saxo Bank to Launch the 18th Equity Theme Basket Focusing on Cannabis

Saxo Bank announced that it is launching the 18th equity theme basket, the cannabis theme basket, which will be the final one before the holiday season kicks in. 

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According to the Saxo Bank, the cannabis theme basket is the second-best performing theme basket this year after Saxo Bank's crypto and blockchain basket up 45%.  The drivers behind the performance are continued legalization in more US states, a Democratic majority owned US Congress which increased the probability of federal legalization of cannabis, and finally continuous high revenue growth numbers from several key industry players. 

Saxo Bank only find 20 companies with good direct exposure to this theme and a sufficient market value. The 20 companies are combined valued at $51bn.  "This is a very small investment theme, but that means that the potential is also likely that much greater." said Peter Garnry, Head of Quantitative Strategies at Saxo Bank. The median revenue growth the past 12 months has been 37% and EBITDA is also improving in the industry. Sell-side analysts covering the companies have an average price target that is 26% above the current market price.

In terms of risks, Peter Garnry notes that the biggest risks when investing in cannabis stocks are the low liquidity and high volatility in many of the stocks driven by the low ownership ratio by institutional investors. The long-term growth outlook is dependent on a US federal legalization of cannabis for both recreational and medical use, but also legal adoption in international markets such as Europe. 

Fazzaco reported that earlier this month, Saxo Bank launched its 17th equity theme basket focusing on 3D printing. ​The new basket on 3D printing companies is the smallest Saxo Bank has done so far with only 16 companies making the cut.