2021-01-05 Jeff Nielson Psychedelic Stock Watch
A new psychedelic stock index ETF adds one more investment driver for investors as they look ahead to 2021
On January 15th, Horizon ETFs Management is expected to launch the first psychedelic stock ETF for psychedelics investors: the Horizons Psychedelic Stock Index ETF. It will mark yet another milestone for this emerging sector.
The creation of a psychedelics ETF: signals two things to the market.
- There is now a large enough critical mass of these companies to be able to create a psychedelic stock ETF.
- There is enough investor demand for companies in this sector to justify the creation of such a fund.
The Horizons ETF will be a passive fund. This means that it will broadly represent the leading public companies.
A very successful year for psychedelic stocks
Last year was the first year of trading for public psychedelic drug companies. As Psychedelic Stock Watch noted with our 2020 wrap up, it was a very successful first year for this new industry.
Among the highlights for investors, we focused on three factors.
- Multi-bagger returns for several companies
- Large and rising capital flows into the industry
- Very favorable media coverage and public opinion
Investors are making money on these companies. They like the sector. And we see that demonstrated by not only the massive capital flows into these companies, but also via very heavy trading volume for several of these stocks.
Framed in this manner, psychedelic drug stocks are an obvious vehicle for a new investor ETF.
The fund itself becomes another driver for psychedelic drug stocks. The ETF will provide increased direct demand for the companies. It will indirectly boost demand for these stocks by bringing more visibility (and credibility) to the sector.
2021 drivers for psychedelic stocks
Apart from this new ETF, psychedelic stock investors already have several major investment drivers to which they can look forward in 2021. Among these:
a) The roughly $500 million in new capital that flooded into the sector in Q4 can power not only a lot of organic growth but also M&A activity.
b) The upcoming ATAI Life Sciences IPO and (potential) uplisting of MindMed Inc (CAN:MMED / US:MMEDF) on the NASDAQ will drive more attention and even more investor capital into this sector.
c) Increasing importance (and revenue potential) of psychedelics-assisted medical clinics.
d) Increasing investor focus on R&D of “novel” psychedelic drug compounds.
The importance of large capital flows and additional premier exchange listings for psychedelic drug stocks is obvious. Less obvious is the increasing focus on psychedelics-based medical clinics and research into novel compounds.
Legal access to psychedelic drugs is improving in both the U.S. and Canada.
Ketamine is already fully legal. Meanwhile, the medicinal use of psilocybin is now legal in the state of Oregon and Canada’s federal government is gradually opening up medicinal use of psilocybin as well (via Health Canada “exemptions”).
This is motivating an increasing number of public companies to launch medical clinic services. Field Trip Health (CAN:FTRP / US:CTRPF) and Numinus Wellness (CAN:NUMI / US:LKYSF) already have active clinic operations. Mind Cure Health (CAN:MCUR / US:MCURF) recently announced it will launch its first clinic in May 2021.
Psychedelic drugs have been in the public domain for (at least) decades. This means that they cannot be patented – in their original form.
However, research into similar chemical compounds does provide the potential for new drug patents. Such R&D on “novel molecules” is becoming a part of the business model of all major players in the industry.
Drug patents – and the large (potential) revenue streams they represent – provide these companies with home run investment potential.
Psychedelic drug stocks poised for next leg of rally
Several psychedelic stocks spiked to impressive highs toward the end of the year. This generated profit-taking and a sharp correction for a number of companies in late December.
This selloff came after these companies had already cashed up via new financings. Consequently, psychedelic stocks are once again attractively priced (and well-capitalized) for investors as they look ahead to 2021 investment drivers.
This year was already looking to be even bigger-and-better for the psychedelic drug industry than 2020. A new psychedelic stock ETF – scheduled to launch next week – adds yet one more catalyst for the sector.
With both market and economic uncertainty still very high, psychedelic stocks and the psychedelic drug industry stand out for investors as a clear investment opportunity.
DISCLOSURE: The writer holds shares in MindMed Inc, Numinus Wellness and Mind Cure Health. Mind Cure Health is a client of Psychedelic Stock Watch.
