ACT: May 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 ACT gained 5.90% on its net asset value (NAV) and 5.88% on its market price. The S&P 500 Index returned 4.76%.

As the market continued a nice bounce back from the COVID related March lows, the Fund outperformed again with alcohol stocks, plus cannabis-related healthcare and pharmaceuticals adding the most value. Alcohol-related restaurant and entertainment stocks also continued a strong recovery.

During May, we reduced our larger than normal cash cushion and returned to near fully invested. Remember that as an actively managed fund, we can choose to hold extra cash when market conditions appear lousy and can choose to invest opportunistically in stocks of our choosing. During May, we increased holdings in the restaurant and bar stocks that we hold due to alcohol sales and enjoyed their nice bounce back.

Portfolio Update

Contributors / Detractors

Top holding Boston Beer (NYSE: SAM) gained 21.05%, after also gaining 26% in April. RCI Hospitality returned 15.64%. Cannabis-related Scotts Miracle Gro (NYSE: SMG) was up 15.44%.  Many healthcare-related companies showed strong returns again in May. All top ten holdings: Catalent Inc. (NYSE: CTLT) gained over 12%, PerkinElmer (NYSE: PKI) gained 10%, and Abbvie (NYSE: ABBV) over 12%.

On the negative side, some tobacco companies and “big beer” detracted from performance, but all are relatively small positions in our portfolio. Imperial Brands (OTC: IMBBY) lost more than 12%, Universal Corp (NYSE: UVV) was down over 8%, plus Philip Morris (NYSE: PM) and Altria (NYSE: MO) both showed small losses. Molson Coors (NYSE: TAP) was also down over 7% for the month.

Top Holdings

Ticker Security Description Portfolio Weight %
SAM BOSTON BEER COMPANY INC-A 7.67%
TMO THERMO FISHER SCIENTIFIC INC 7.45%
ABT ABBOTT LABORATORIES 6.61%
ABBV ABBVIE INC 6.23%
PKI PERKINELMER INC 5.68%
NVS NOVARTIS AG-SPONSORED ADR 5.11%
BF/B BROWN-FORMAN CORP-CLASS B 5.04%
LVMUY LVMH MOET HENNESSY-UNSP ADR 4.90%
MGPI MGP INGREDIENTS INC 4.72%
CTLT CATALENT INC 4.05%

As of 05.31.2020. Cash is excluded.

Please see our complete Fund holdings at advisorshares.com/etfs/act. The holdings details are updated each market day.

Cheers,

Dan Ahrens
AdvisorShares
AdvisorShares Vice ETF (ACT) Portfolio Manager

 

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.