Psychedelic Stocks?

[preparations]

The whole market around psychedelic stocks (Psilocybin, LSD, etc) has been booming in Q3 2020.
Reasons include a growing social acceptance around drug use and an increased attention on mental health.

Health Canada has already granted licenses to certain companies to conduct research to standardize the extraction of psilocybin from mushrooms.
In the U.S., the FDA has declared psychedelics a breakthrough therapy for severe depression.
Oregon approved a legal framework for the therapeutic use of psilocybin. Becoming the first state to do so.
Oakland, Santa Cruz and Denver have already decriminalized psilocybin.

Now to my question:
I’m thinking about investing like 5-10k into this field out of pure interest.
I’m a completely passive investor so I was looking for some funds to invest into - turns out Horizons Psychedelic Stock Index ETF is expected to start trading around January 15th. It will have a management fee of 0.86% of the ETF’s net asset value with a potential 15% performance fee payable to the ETF manager if a 3%+ annualized return is achieved. That’s way too much if you ask me.

I’m now thinking about just investing in a few of the biggest companies that are listed right now.
So I stumbled upon this site https://psychedelicinvest.com/index/.

How would you guys handle this? Just pick 5 companies and invest 2k into each? Is there even any different approach? I don’t think that I’m smarter than the market so I’d like to avoid buying a 10M$ marketcap stock just because I think it has more potential than the others.

[Zerte2]

@preparations

How would you guys handle this? Just pick 5 companies and invest 2k into each?

There is this old saying, “invest in what you understand”. So why not try those companies’ products, and effectively pick some letters from a scrabble bag (a field-tested technique: google for “scrabble bag portnoy” for details)?

[s-g]

The fact that such an ETF even exists is nuts…
The scope is so narrow that it’s basically on the same level of individual stock picking, this probably explains why their fees are comparable to the ones of an actively managed fund.
It also has to be one of the higher risk sectors out there…any small regulatory change can mean the death of the whole industry I guess.

I wouldn’t suggest to put any serious money on these unless you have done extensive research on these companies and their products ( ) and you actually think that you know better than the market. At that point you should be comfortable picking the more interesting companies out of the bunch.

[preparations]

@Zerte2

So why not try those companies’ products

That’s going to be quite difficult whilst living in Switzerland.

@s-g

any serious money

It’s just play money that I don’t mind losing.

@s-g

their products ( )

Actually I’ve never taken any psychedelic drugs. Would be interesting to hear some opinions of people that have.

[MrCheese]

@preparations

Actually I’ve never taken any psychedelic drugs. Would be interesting to hear some opinions of people that have.

Given the new lockdown I’d be totally up to try some…

Jokes aside. The mentioned ETF almost sounded like the structured products about which @MrRIP recently posted. The selection is so small and the companies are competitors of eachother…

[kilyn]

These are illegal almost everywhere… might as well go for the big money and invest straight into cocaine, heroine, etc. Lack of publicly tradeable companies would be a major obstacle - these are all probably private family businesses or so

You used to be able to invest into opiates indirectly via US pharma but that ship has sailed after recent scandals

[preparations]

Well that’s the point - they’re mostly legal but more and more places decriminalize them. IMO it’s just a matter of time until they will be completely legal in some countries. They’ll also be used to treat mental diseases.

@kilyn

Lack of publicly tradeable companies would be a major obstacle - these are all probably private family businesses or so

There are 2 companies over 1B USD marketcap. So I wouldn’t say that they’re non-existant.

@MrCheese

The mentioned ETF almost sounded like the structured products about which @Mr.Rip recently posted.

It’s definitely not something I’d buy - that’s why I have created this thread. But if there’s one ETF it’s just a matter of time until there are a few more.

[s-g]

@preparations

They’ll also be used to treat mental diseases.

I don’t think you should count on this to provide large returns for those companies.
If psychedelics start to be used profitably as a medical treatment I’d expect Big Pharma to jump in the market and quickly kill off all these small players.

After all I’d be surprised if they have any new revolutionary technology, and the LSD patent has expired decades ago…

[preparations]

@s-g

Big Pharma to jump in the market and quickly kill off all these small players.

That’s actually a good point…

I think I’ll do some more reseach about the whole topic and think about investing in it for a second time.