ETF Edge

Cannabis ETFs have made a double-digit comeback in recent weeks. What managers are saying

James Romano trims flower while working in CommCans processing facility in Medway, MA on Oct. 27, 2021. Beneath the trimmed flower is a tray collecting shake, cannabis flower that has naturally broken down through handling. Shake can be used in CommCans pre-rolled joints or made into edibles.
Erin Clark | Boston Globe | Getty Images

The catalysts for cannabis stocks are adding up, according to several exchange-traded fund managers.

Cannabis ETFs have bounced in recent weeks, with most of the major funds making double-digit comebacks. Since Jan. 31:

Canadian producer Canopy Growth's earnings report boosted the whole group on Wednesday, with even U.S.-based cannabis ETFs that don't hold the stock rising sharply on the heels of the results.

"The smart money is more focused on the U.S. cannabis stocks," AdvisorShares' Dan Ahrens told CNBC's "ETF Edge" in an email Wednesday.

As managing director and chief operating officer at AdvisorShares, Ahrens runs MSOS, the largest cannabis ETF on the market, with over $1 billion in assets under management, according to ETF Database.

More buzz in Washington has also helped cannabis investments, Ahrens said. He pointed to the re-introduction and passing of the Secure and Fair Enforcement Banking Act in the House of Representatives last week and discussion around other cannabis-related bills.

Now part of the America Competes Act, the SAFE Banking Act would give cannabis companies access to financial institutions and capital markets. The Senate is set to vote on the America Competes Act in the coming weeks.

"We hear there's also good headway on discussions behind the scenes involving social reform/social equity and past convictions," Ahrens wrote.

Almost exactly a year after the "blow-off top" in cannabis stocks, some support finally seems to be emerging for these names, said Tim Seymour, the portfolio manager behind CNBS.

Not only is there "better price action globally" with risk-on appetites reemerging, but "the technicals are getting supportive," Seymour told CNBC's "ETF Edge" in an email.

Canopy's report may have even triggered some short covering, said Seymour, who is also a CNBC contributor and the founder and chief investment officer of Seymour Asset Management.

Add to that some recent merger and acquisition activity, and there's a lot for investors to like in this space now that the SAFE Act is "not an if, but a when," Seymour wrote.

U.S. multistate operator Verano announced it would acquire its more science-focused peer Goodness Growth for $413 million on Feb. 1.

The SAFE Banking Act's sixth attempt at passage offers cannabis investors a "glimmer of hope" after a disappointing 2021, THCX managing director Matt Markiewicz said in an email to CNBC's "ETF Edge."

"Secondly, cannabis stocks were not immune to the rotation out of growth to value ahead of impending Fed rate hikes," Markiewicz wrote.

"While we don't agree that the baby should have been thrown out with the bathwater, cannabis stocks suffered the same fate as many speculative transformational technology stocks," he said. "If that thrashing of growth has subsided for now, there is a chance we continue to see a strong bid to cannabis names in the weeks ahead especially those with sound business models."