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Psychedelic ETF Deep Dive: 3 Stocks Outperform Market

In this week’s Marijuana Market Update: Matt looks at three stocks contained within the PSYK Psychedelic ETF. Are they all buys?
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In this week’s Marijuana Market Update, I discuss three psychedelic stocks that look like great entry points into this exciting and growing market.

I cover their performance and also discuss a new psychedelic ETF.

Late last summer, I responded to a viewer question about investing in the psychedelic industry as it relates to cannabis.

At the time, only Oregon had some kind of psychedelics legislation.

Fast forward to today, there are 23 states with some form of decriminalization or pending legislation regarding the use of psychedelics.

Thirteen states, including Florida, Kansas, Oklahoma, New York, Pennsylvania, Massachusetts, Utah and Maine, have active legislation to decriminalize psychedelics.

But something came up a few weeks ago that caught my attention.

PSYK ETF Analysis

Florida-based Elemental Advisors Inc. launched the first listed psychedelic exchange-traded fund (ETF): the PSYK ETF (NYSE: PSYK).

The fund tracks the performance of the Enhanced Consciousness Index. The Index is made up of companies involved in the research, development, production and use of psychedelics to treat medical conditions in legal applications.

PSYK Is Still New

PSYK only started trading in early February, so its stock price movement data is limited.

After starting with an opening price of $21.20 per share, the ETF dipped to a low of $20.40.

Within three trading days, PSYK reached $22.15 — a 5% increase from its open and a 9% jump from that low.

It tested some resistance at that level, but has settled to around $20.79 as of the recording of this video.

PSYK’s performance has been bouncy, but with the broader market and cannabis headwinds, it’s not unexpected.

Excluding its cash, the ETF currently holds 26 companies — some are familiar to cannabis investors, while others may not be.

Its top holdings are Intra-Cellular Therapies Inc. (Nasdaq: ITCI) and Biohaven Pharmaceutical Holding Co. Ltd. (NYSE: BHVN).

More well-known holdings are:

  • ATAI Life Sciences N.V. (Nasdaq: ATAI).
  • Jazz Pharmaceuticals PLC (Nasdaq: JAZZ).
  • Mind Medicine (Mindmed) Inc. (Nasdaq: MNMD).
  • Compass Pathways PLC (Nasdaq: CMPS).

But I want to focus on PSYK’s two biggest holdings today.

PSYK Psychedelic ETF Analysis

Intra-Cellular Therapies (Nasdaq: ITCI)

ITCI develops novel drugs to treat neuropsychiatric and neurological diseases. Its biggest drug candidate, Caplyta, is currently in development to treat schizophrenia, bipolar disorder and disturbances associated with dementia and autism.

The company is also developing a drug to inhibit the enzymes associated with Parkinson’s disease.

ITCI plans to release its most recent quarterly earnings on March 1, where analysts expect a year-over-year decline in earnings on higher revenues. Though analysts have revised the company’s EPS 12.5% higher over the last 45 days.

ITCI’s Recent Success

ITCI psychedelic stock chart

Volatility hit the company’s stock in 2021, with many peaks and valleys in its price.

However, the stock has climbed higher this year.

From January 17 to February 17, ITCI jumped 48% to a new 52-week high price of $57.49.

Recent broader market tensions have pushed that price down to around $55 per share, but it’s still a great showing.

Its trading ratios are trending higher than industry peers. ITCI’s price-to-sales sits at 65.2, compared to the industry average of 18.8. Its price-to-book ratio is 26.5, and the industry average sits at 15.3.

Biohaven Pharmaceutical (NYSE: BHVN) Analysis

Then there is Biohaven.

The biopharma company is well known for its Nurtec OTD treatment for acute migraines and other migraine-related treatments that are in drug trials now.

It’s currently testing drugs to treat Alzheimer’s, Amyotrophic Lateral Sclerosis (ALS) and other neuropsychiatric issues.

BHVN Looks Bullish

BHVN psychedelic stock chart

BHVN is up almost 75% from its position 12 months ago. It hit a 52-week high in October 2021.

More recently, the stock has jumped almost 25% since January 17, but is still short of its highest high.

Both BHVN and ITCI have shown positive movement in stock price; both are trading well above their peer average and above their 50-day moving average.

For more insight, we can look to the Money & Markets Cannabis Power Rating of these two stocks:

ITCI's overall rating is 74, with a “Strong Bullish” 98 on momentum. It loses out on its value — as I mentioned, it is currently overvalued compared to its peers.

BHVN scores a “Neutral” 40 overall with a “Bullish” 79 on momentum and a “Bearish” 17 on value.

I looked into another constituent of the PSYK ETF — Jazz Pharmaceuticals PLC (Nasdaq: JAZZ) and found something interesting.

Jazz Pharmaceuticals PLC (Nasdaq: JAZZ) Analysis

JAZZ scores a “Bullish” 90 overall, with a “Bullish” 89 on momentum and a “Neutral” 58 on value — this leads me to believe that out of the three, JAZZ might be the best buy option.

Jazz Is Well Off Its Highs

JAZZ psychedelic stock chart

JAZZ’s stock chart suggests it might be testing some resistance at $140 after falling 15% from where it was a year ago. JAZZ reached a 52-week high of $186.52 in June 2021 and is 26% down from that high.

The Takeaway on PSYK and Psychedelic Stocks

Despite the comparison, it’s important to understand that in the case of all three of these companies, none are yet profitable. JAZZ has the fastest path to profitability, and BHVN is not far behind.

The answer to which to invest in is mixed. If you’re investing in the psychedelic market, you must be willing to play a long game. Gains won’t happen overnight. They may not even happen this year.

This is a new sector of the market. The price of the PSYK Psychedelic ETF isn’t bad, especially compared to many of its holdings. So if you are looking for a cheaper way to get into the market with a little more diversity and the potential of a dividend yield, PSYK is the way to go.

One more thing: You can get Money & Markets swag by submitting a question for me, Adam O’Dell or Charles Sizemore that we use in any of our videos. Just send us your questions and feedback.

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Where to Find Us

Coming up this week, we’ll have more on The Bull & The Bear podcast, so stay tuned.

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We have a lot of great weekly video features on our channel, including: 

  • Ask Adam Anything — Where I get to sit down with chief investment strategist Adam O’Dell and ask him any question (from you or me) and get his insights into the stock market. 
  • Investing With Charles — Green Zone Fortunes co-editor Charles Sizemore and I talk about all things related to stocks and the economy, including comparing stocks to give you the best investment advice. 
  • The Bull & The Bear — Our weekly podcast where I show you the trends and analysis that moves the market. 

All of these series are on our YouTube channel.

Safe trading,

Clark_Sig

Matt Clark, CMSA®
Research Analyst, Money & Markets

Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Prior to joining Money & Markets, he was a journalist and editor for 25 years, covering college sports, business and politics.

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