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The Global Cannabis Giants Index (BGCANG Index) is designed to track the performance of the top 20 listed companies with an exposure to the cannabis industry. The index tracks only companies whose revenues have at least 50% exposure to the cannabis industry. This has led to the Cannabis Giants Index becoming the global definitive stock market benchmark index for marijuana-exposed stocks. The Cannabis Giants Index was started by BITA, a German-based FinTech company, on the 16th of November 2018. The objective was to reliably track the performance of top publicly traded companies with the widest exposure to the medical cannabis industry. The value of the index at inception was 1000 points. It initially drifted lower to hit an all-time low of circa 724 in December 2018, before turning higher to post a high of circa 1240 in March 2019. It has since drifted lower to trade at around the 820-region, as of August 2019.
The drift lower in 2019 was due to concerns that cannabis stocks and the general industry was experiencing high valuations. Also, the volatile nature of the industry was exposed further as the coronavirus pandemic hit the globe.
As an industry that benefitted from investor excitement, it suffered the worst consequences in a period where investors exercised heightened caution in the broader equities market and even more restraint in alternative sectors, such as the cannabis industry.
Government lockdown and curfew restrictions also inspired a general economic slowdown and this led to disrupted supply chains and shop closures. All these factors saw BGCANG drop to below 300 in Q1 2020, and the index spent the majority of the year well below the 500-price point.
However, as the global market sentiment became more optimistic due to the availability of COVID19 vaccines, the cannabis industry, which almost went down in smoke, quickly got back its high. BGCANG managed to take out the 500-price barrier in January 2021, and by February 2021, it had soared to highs of above 1055. It then retreated to lows of just below 600 as of April 2021.
The Cannabis Giants Index is capitalisation-weighted (inclusion depends on market capitalisation) with a 15% Capping Factor applied to reduce concentration of individual companies and to achieve true diversification. To be included in the index, a company must meet the following conditions:
BITA applies the above liquidity and revenue exposure filters to select the top 20 companies from all over the world to be included in the index.
Here are the top 10 companies included in the Cannabis Giant Index ranked by their weight as of April 2021:
| Company | Weight |
| Gw Pharmaceuticals 1for12 ADR | 17.86% |
| Innovative Indl.Props. | 15.06% |
| Canopy Growth | 14.27% |
| Aphria | 12.98% |
| Cronos Group | 9.63% |
| Tilray 2 | 9.10% |
| Aurora Cannabis | 5.17% |
| Sundial Growers Inc | 4.19% |
| Hexo | 2.16% |
| Organigram Holdings | 1.55% |
BITA has provided a 16-page whitepaper that details the index formula, but it generally applies the principles below:
The Cannabis Giants Index rebalances quarterly to delete or add qualifying constituent companies. The reviews are conducted on the third Friday of March, June, September and December using closing prices, while the changes will reflect on the succeeding Monday at market open.
Marijuana has been used by humans for thousands of years as both a medicinal and recreational drug. In the last century, it has largely been an illegal product, but the last decade has seen massive breakthroughs for the industry, which has attracted investors to invest money in companies involved in the main value chains of cannabis:
Major milestones have been achieved over the past decade, ensuring that the marijuana industry is firmly out of the taboo zone. It was in 2009 that the then US Attorney General, Eric Holder, directed the Drug Enforcement Agency (DEA) to stop raids on legal, medical marijuana dispensaries, which signalled the softening stance of the US Federal Government on the drug. The industry would receive further encouragement when Congress passed the Rohrabacher-Farr Amendment, which protected States’ rights to enact legal cannabis protection without federal interferences. A little shocker came at the start of the Trump presidency, in 2016, when the new Attorney General took steps to repeal some of Obama’s pro-cannabis regulations, but he resigned in late 2018 and his successor, William Barr, confirmed in a congressional sitting that his office would not crack down on the industry.
With more than 30 states already having legalised medical marijuana, as of August 2019, the industry now has breathing space in the US, a far cry from when the Federal Government frowned upon the State of California for legalising marijuana in 1996. The headlines in the US are exciting the entire world, but Canada is way ahead of the game. Medical marijuana was legalised in the country in 2001, and the 2018 Federal enactment of the Cannabis Act formally legalised the cultivation, possession, acquisition and consumption of marijuana and its by-products. In Europe, the Netherlands is famous for its Cannabis coffee shops that started way back in the 1970s, and the United Kingdom is also open to medical marijuana debates. Still, as the world’s superpower, the investing public is eagerly awaiting the US Federal legalisation of marijuana. And it seems that the wait is almost over.
In December 2018, Hemp (also made from the cannabis plant) was federally legalised. Both Hemp and marijuana contain the chemical ingredient, Cannabidiol (CBD), but Hemp has lower levels of the psychoactive Tetrahydrocannabinol (THC) that is the primary component of the cannabis plant. Granted, the cannabis industry still operates in a legal grey area, but a lot of associated risks are actually perceived, not real. This creates an enormous opportunity for investors eyeing practically abnormally high growth.
For an industry still in a unique infancy stage, the factors that affect the benchmark Cannabis Giants Index are varied. Legalisation is the biggest headline in the industry, with the Index reacting accordingly when such news hits the wires. The industry is also a target of special taxation in different jurisdictions. A significant move in an individual component stock will also influence the direction of the Index. To this regard, it is important to understand the nature of the market that a constituent stock company targets. Each geographical market has different opportunities and faces unique local risks. This also means that there is relatively high positive stock price correlation for companies that operate in, or services within the same jurisdiction.
There are many benefits to trading the Cannabis Index as follows:
Here are some of the many advantages of trading the Cannabis Giants Index as a CFD at AvaTrade:
The Cannabis Index is a capitalization weighted index of the top 20 global companies that have at least a 50% revenue exposure to the cannabis industry. Additionally there is a 15% capping factor applied to avoid a concentration of individual companies. Companies included must have a minimum average daily trading volume of $1 million over the past 90 days and must also be listed on a global stock exchange. The three largest companies currently included in the index are Cronos Group, Aurora Cannabis, and Canopy Growth.
As an index in a very new industry the Cannabis Index can see greater volatility when compared with established market groups and indices. This can lead to strong rallies, and sharp drops. The factors most impacting the index at this point are government regulations surrounding cannabis, the rollout of new stores and new products, and of course supply and demand. In fact it was a glut in the supply chain that was responsible for a drop in the Cannabis Index in 2019, and it’s demand that investors are counting on to lift the index in coming months.
As the cannabis industry recovers from its bear market of 2019 there are several strategies that traders can employ to best trade the Cannabis Index. One is to follow the trend in the index, which has been steadily lower over the past year. A more contrarian approach would be to look for reversals, particularly reversals that could lead to a breakout move to the upside for the index. With the Cannabis Index so depressed any breakout rally has the potential to deliver massive returns.
Trading cannabis has quickly gained momentum, and with the many medical and recreational uses of this drug, the investment potential is limitless. You can now trade the Cannabis Giants Index and other cannabis stock CFDs with AvaTrade, a globally regulated broker you can trust.