Spring isn't the only thing that's making everything green right now. The marijuana industry has been busy creating "green" for investors for the better part of three years. It's delivered an especially strong performance since 2019 began, with the average pot stock running circles around the broad-based S&P 500.

Then again, we're also talking about an industry with dozens upon dozens of marijuana stocks for investors to choose from. Since there's no real precedent to look back on when it comes to cannabis legalization, it's really anyone's guess at this point which marijuana stocks will come out greener on the other side and which pot stocks will go up in smoke.

For some investors, this is an acceptable risk to take for such a high-growth industry. But other folks prefer the safety in numbers offered by exchange-traded funds (ETFs).

An up-close look at a flowering cannabis plant in a hybrid greenhouse.

Image source: Getty Images.

This marijuana ETF is a cannabis industry first

Two years ago, Horizons introduced the world to the very first cannabis ETF, the Horizons Marijuana Life Sciences ETF (OTC:HMLSF). Today, the Horizons Marijuana Life Sciences ETF holds about four dozen pot stocks of various weightings and possesses more than 933 million Canadian dollars in net assets (CA$933 million). In other words, for a reasonable net expense ratio of 0.75% a year, an investor can gain instant diversification within the marijuana industry. And more important, an initial $10,000 investment would have more than doubled, inclusive of dividends, over the past two years. 

However, Horizons believed that something was missing with its marijuana ETF lineup and with the cannabis ETF offerings of the stock market, as a whole. That's why, two weeks ago, it introduced the world to the first-ever U.S.-focused marijuana ETF, the Horizons US Marijuana Index ETF, which is trading in Canada under the ticker symbol "HMUS." It often takes a few weeks before new issues in Canada are listed on the over-the-counter exchange in the U.S. should investors in the U.S. want to buy this new investment tool.

As of this past weekend, the Horizons US Marijuana Index ETF had just a hair over CA$20 million in net assets, and its early trading volume has been anemic. Then again, most folks probably aren't aware that this new investment vehicle even exists. Compared to its broad-based counterpart, the Horizons Marijuana Life Sciences ETF, the U.S.-focused fund also checks in with a modestly higher net expense ratio of 0.85% vs. 0.75%. 

A black silhouette of the United States, partially filled in by cannabis baggies, rolled joints, and a scale.

Image source: Getty Images.

Here are the stocks held in the newest U.S.-focused marijuana ETF

You're probably wondering what, exactly, is being held by the Horizons US Marijuana Index ETF. Let's take a closer look.

Following its first full week of trading, the newest ETF offering from Horizon held 32 U.S.-focused pot stocks. Then again, most of its net assets (81%) were tied up in just 12 stocks as of April 26. Those 12 companies are, with weightings:

  • Curaleaf Holdings (OTC:CURLF): 13.67%
  • Cresco Labs: 12.91%
  • Charlotte's Web Holdings (OTC:CWBHF): 9.92%
  • MedMen Enterprises: 8.13%
  • Green Thumb Industries: 7.52%
  • Acreage Holdings: 5.2%
  • iAnthus Capital Holdings: 4.99%
  • Green Growth Brands: 4.19%
  • TerrAscend: 3.72%
  • Origin House: 3.69%
  • Harvest Health & Recreation (OTC:HRVSF): 3.64%
  • Flower One: 3.28%

Now that you have a pretty good idea of what you'd be invested in should you choose this ETF, let's look at two of the interesting nuances of this fund.

A large dispensary store sign, with a cannabis leaf and the word dispensary written underneath it.

Image source: Getty Images.

This fund is heavily weighted to dispensary stocks

First of all, if there's one aspect of this fund that jumps off the page, it's that it's highly weighted toward vertically integrated dispensary operators. While this should be no surprise in the United States, where cannabis remains a Schedule I substance at the federal level, thus disallowing transport between states, it's still alarming just how much weighting the vertically integrated dispensary model is given.

Curaleaf is currently the largest dispensary operator by market cap, and with 43 open retail stores, it has the largest physical presence for the time being. In terms of peak retail store licenses, though, it's Harvest Health & Recreation that has the upper hand on the field.

But we also have Cresco Labs, which is in the process of buying Californian pot distributor Origin House, in the second spot for weighting, upscale dispensary operator MedMen in the fourth spot, Green Thumb at five, Acreage Holdings at six, and iAnthus Capital Holdings in the seventh spot. With the exception of hemp-based cannabidiol (CBD) products manufacturer and distributor Charlotte's Web, six of the top seven holdings are part of the vertically integrated dispensary model.

When all is said and done, close to 60% of the Horizons U.S. Marijuana Index ETF's assets are tied up in dispensary stocks.

A cannabis leaf partially covering Ben Franklin's face, with his eyes peering out between the leaves.

Image source: Getty Images.

It's semi-allergic to profitability

The second interesting observation is that this fund is somewhat allergic to profitability. Although earnings reports haven't exactly been the marijuana industry's strong suit in the early going, there have been a couple of pot stocks to generate an operating profit. The aforementioned Charlotte's Web is arguably the most profitable of all marijuana stocks and is thus an excellent addition as the third-largest weighting. Plus, with hemp and hemp derivatives now legal, Charlotte's Web will have few problems pushing its products into new retail doors.

But beyond Charlotte's Web, it's as if profitability gets de-emphasized, even with relatively large companies. Trulieve Cannabis (OTC:TCNNF), which recently opened its 27th store in Florida, has been generating an operating profit for many quarters now. Trulieve has taken advantage of Florida's older population, which is more likely to benefit from medical cannabis. However, Trulieve, the 13th-largest pot stock by market cap, only gets a meager 1% weighting in the newest U.S.-focused pot fund, which makes little sense. Harvest Health has also been operationally profitable but is relegated to only the 11th-largest weighting, despite one of the largest market caps of any pot stock.

Ultimately, having a new marijuana ETF tool is exciting. But when it comes to investment-worthiness, for the time being, I'm not seeing anything about this U.S.-focused ETF that screams buy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.