ACT: April 2020 Portfolio Manager Review

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For the fund’s most recent standardized and month-end performance, please click www.advisorshares.com/etfs/act.

Commentary

For the month, the AdvisorShares Vice ETF (ACT) gained 13.52% % on its net asset value (NAV) and 14.33% on its market price. The S&P 500 Index returned 12.82%.

As the market performed a nice bounce back from the COVID related lows, ACT outperformed with healthcare and pharmaceuticals leading the way. Alcohol stocks and alcohol-related restaurant stocks also had a very nice bounce for the month. The Fund actually performed much like we’d expect it to. Alcohol and tobacco stocks have historically been considered recession-resistant stocks that perform regardless of movements in the overall market. With the COVID-19 pandemic, its been well documented that alcohol sales are spiking. People are simply drinking at home and getting alcohol through increased home delivery and curbside pickup. Additionally, multiple alcohol distilleries have gotten involved in alcohol production for hand sanitizers.

Like we’ve seen with alcohol sales, cannabis-related sales have performed similarly. Sales are spiking along with the pandemic’s stay at home orders. Dispensaries have been deemed essential business. Much of our cannabis-related holdings in ACT’s portfolio are actually pharmaceutical and healthcare companies with DEA licenses for cannabis, but where their primarily business focus is elsewhere. A number of our top holdings are directly involved with coronavirus – whether it be face mask production or work on the development of treatments or immunizations.

Portfolio Update

At the end of April, ACT is still holding a larger than normal cash position. Under normal circumstances, ACT stays near fully invested. At the end of April, we’re holding just over 5% in cash. In early May, I’ve already opportunistically invested some of that cash.

Contributors / Detractors

Many healthcare-related companies showed healthy returns in April, including some top ten holdings: Catalent Inc. (NYSE: CTLT) gained over 33%, Abbott Labs (NYSE: ABT) was up 17%. Thermo-Fisher Scientific (NYSE: TMO) gained 18%, PerkinElmer (NYSE: PKI) gained 20%, and Abbvie (NYSE: ABBV) over 9%. On the alcohol-related side, always one of our largest holdings, Boston Beer (NYSE: SAM) was up 26%, while Jack Daniels maker Brown-Forman (NYSE: BF.b) was up 12%.  

Only one security in the portfolio was negative in April – a small position in foreign alcohol company AmBev (NYSE: ABEV).

Top Holdings

Ticker Security Description Portfolio Weight %
TMO THERMO FISHER SCIENTIFIC INC 7.56%
ABT ABBOTT LABORATORIES 6.80%
SAM BOSTON BEER COMPANY INC-A 6.71%
ABBV ABBVIE INC 5.85%
PKI PERKINELMER INC 5.42%
NVS NOVARTIS AG-SPONSORED ADR 5.25%
BF/B BROWN-FORMAN CORP-CLASS B 5.04%
CTLT CATALENT INC 4.92%
LVMUY LVMH MOET HENNESSY-UNSP ADR 4.74%
BREW CRAFT BREW ALLIANCE INC 3.68%

Please see our complete Fund holdings at advisorshares.com/etfs/act. The holdings details are updated each market day.
As of 04.30.2020. Cash is excluded.

Cheers,

Dan Ahrens
AdvisorShares
AdvisorShares Vice ETF (ACT) Portfolio Manager

 

Past Manager Commentary

Definitions:

The S&P 500 Index is a broad-based, unmanaged measurement of changes in stock market conditions based on the average of 500 widely held common stocks. One cannot invest directly in an index.


Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by visiting www.advisorshares.com. Please read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.

There is no guarantee that the Fund will achieve its investment objective. An investment in the Fund is subject to risk, including the possible loss of principal amount invested. Emerging Markets, which consist of countries or markets with low to middle income economics can be subject to greater social, economic, regulatory and political uncertainties and can be extremely volatile. Other Fund risks include concentration risk, foreign securities and currency risk, ADRs which may be less liquid, large-cap risk, early closing risk, counterparty risk and trading risk, which can increase Fund expenses and may decrease Fund performance. The Fund is, also, subject to the same risks associated with the underlying ETFs, which can result in higher volatility. This Fund may not be suitable for all investors. See prospectus for detail regarding risk.

Investing involves risks including possible loss of principal. Cannabis-related companies are subject to various laws and regulations that may differ at the state/local and federal level. These laws and regulations may significantly affect a cannabis-related company’s ability to secure financing, impact the market for marijuana industry sales and services, and set limitations on marijuana use, production, transportation, and storage.  In addition to regulatory action, litigation initiated by private citizens or companies could have a negative impact on the financial and/or operational status of cannabis-related companies. Pronouncements from the current Administration suggest the Department of Justice (“DOJ”) may push back against states where marijuana use and possession is legal, step up the enforcement of federal marijuana laws and the prosecution of nonviolent federal drug crimes and, in the event the Rohrabacher-Farr amendment is not renewed by Congress, begin using federal funds to prevent states from implementing laws that authorize medical marijuana use, possession, distribution, and cultivation. Such actions by the DOJ could produce a chilling effect on the industry’s growth and discourage banks from expanding their services to cannabis-related companies where such services are currently limited.

Companies in the food, beverage and tobacco industry are very competitive and subject to a number of risks. Demographic and product trends, changing consumer preferences, nutritional and health-related concerns, competitive pricing, marketing campaigns, environmental factors, adverse changes in general economic conditions, government regulation, food inspection and processing control, consumer boycotts, risks of product tampering, product liability claims, and the availability and expense of liability insurance can affect the demand for, and success of, such companies’ products in the marketplace. For a full summary of the risks, please see the prospectus.

Shares are bought and sold at market price (closing price) not NAV and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined), and do not represent the return you would receive if you traded at other times.

Holdings and allocations are subject to risks and to change.

The views in this commentary are those of the portfolio manager and may not reflect his views on the date this material is distributed or any time thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.