It may be hard to believe for some investors, but in terms of public companies the psychedelic drug sector is barely a year old. As this sector emerges, Horizons ETFs has marked a milestone for the industry: the first psychedelic stock ETF (PSYK).
PSYK commences trading on January 27, 2020 on Canada’s Neo Exchange. The stated objective of the fund is to replicate “a market index that is designed to provide exposure to the performance of a basket of North American publicly-listed life sciences companies having significant business activities in, or significant exposure to, the psychedelics industry.”
Specifically, the benchmark for PSYK is the North American Psychedelics Index. The composition of this index can be found below. The performance of the Index can be seen here.
Given this composition, an (unofficial) list of the fund weightings found online seems to correspond to the Index.
The fund will provide primary exposure to the companies who are part of the composite Index. But it will provide indirect exposure to the entire sector.
Intrepid investors in psychedelic stocks looking for some undiscovered (undervalued) gem will likely look for prospects outside of this Index.
As with all ETFs, PSYK will be a good vehicle for investors who are new to this emerging sector, or simply novice investors looking for some exposure to psychedelics.
As Psychedelic Stock Watch recently observed, we are close to “low tide” in the psychedelic stocks at present. So this is a good time for PSYK to make its debut – as it gives investors an entry point to the sector with valuations at attractive levels.
Why should new investors want exposure to this sector?
It starts with the Mental Health Crisis. A global epidemic of stress-related conditions like depression, anxiety, addiction and PTSD, afflicting over 1 billion people worldwide.
The current standard of care for these mental health conditions is woefully inadequate (hence the “Crisis”). Psychedelic drugs are seen as a clear choice to not merely improve the standard or care for these conditions but to revolutionize treatment.
These are multi-billion-dollar treatment markets that are totally up for grabs. But that’s just the tip of the iceberg.
With the Renaissance in medical research on psychedelic drugs, psychedelics R&D is already branching into numerous other areas of mental and conventional healthcare.
Though the sector is barely a year old, it’s already attracting a ton of investment capital. Over $500 million has flooded into the sector via financings in roughly just the last four months.
Along with the huge flows of capital have come a long list of high-profile investors piling into the space. This includes billionaires like PayPal’s Peter Thiel and GoDaddy’s Bob Parsons.
Want one more reason to bet on the psychedelic drug sector? The U.S. military.
The Department of Defense is one of the world’s largest donors funding psychedelic drug R&D. The U.S. military has its own Mental Health Crisis that is arguably even more severe than the general global epidemic.
But the Department of Defense can’t access the treatment benefits of psychedelic medicine while these drugs remain illegal.
The legal cannabis industry has had great difficulty trying to overcome the biases of the U.S. political Establishment. The psychedelic drug industry has the proverbial “friends in high places” necessary to make such political roadblocks evaporate.
A new sector for investors. A new ETF to facilitate entry into this sector. Opportunity knocks.
DISCLOSURE: The writer holds shares in MindMed Inc, Numinus Wellness, Cybin Inc. and Mind Cure Health. Mind Cure Health is a client of Psychedelic Stock Watch.