MSOS: 4th Quarter 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/msos.

Commentary

AdvisorShares Pure US Cannabis ETF (NYSE: MSOS) launched on September 2, 2020 with $2.5 million is assets. By year-end December 31, its assets under management had increased to over $220 million, and to over $600 million by the time of this writing in mid-January. Investor interest in the first U.S. listed ETF focused solely on the U.S. cannabis market has been tremendous.

For the last quarter, MSOS was a top performer among all cannabis-focused ETFs, gaining 66.70% on its net asset value (NAV) and 66.33% on its market price. (Its predecessor and sister fund here at AdvisorShares, YOLO, was also a top performer with 58.57% on NAV and 59.02% market price for the same period).

With a Democratic Presidential victory in the November election, a positive sweep of six cannabis ballot measures in five states, followed by Democrats narrowly gaining control of the Senate through January run-off elections, cannabis momentum is extremely high. Wide-ranging cannabis reform is now expected. But – cannabis investment education is still badly needed in many circles. Investors need to understand that even the Democratic Party’s platform never called for full federal legalization of marijuana. I expect cannabis banking reform, 280e tax reform, continued expansion of medical marijuana, and strengthening of recreational cannabis at a state level. Reforms will happen so that state cannabis law will not be contrary to federal law. These can all be considered major victories for U.S.-based multi-state operations (MSOs). Cannabis reform will still be debated, negotiated and messy.  The many smaller steps of changes in cannabis-related laws can lead to the home-run victory for U.S. cannabis companies of uplisting to major exchanges such as the NYSE or NASDAQ. Once that occurs, I expect investment capital should follow in a big way. Without full federal legalization and open border laws, Canadian LPs will remain Canadian and I do not expect them to do business in the U.S. for the foreseeable future.

Positions:

MSOS added a great deal to existing positions during the quarter, but we did not add any new names. (We have added some in January). A few small positions from the original launch portfolio have since been removed.

Winners and Losers:

During the 4th quarter, many of the Fund’s largest holdings were among the very best performers. MSO positions were up strongly across the board. In our top five holdings, Curaleaf (OTC CURLF – swap) gained 56%, Trulieve (OTC TCNNF – swap) gained over 62%, and Green Thumb Industries (OTC GTBIF – swap) gained over 89%, Cresco Labs (OTC CRLBF – swap) gained 64%, and Terrascend (OTC TRSSF – swap) gained a big 132%. Each MSO position we held was positive for the period. It feels strange to say that those gaining less than 66% actually detracted from performance of the Fund.

GrowGeneration (NASDAQ: GRWG) was up 151% for the three-month period.  Innovative Industrial Properties, Inc (NYSE: IIPR) gained over 48%. Greenlane Holdings (NADAQ: GNLN) gained over 76% There were plenty of other double-digit gainers as the sector was up dramatically in general.

With the Fund up dramatically for the period, it’s hard to find losers. A very small position in Zynerba Pharmaceuticals (NASDAQ: ZYNE) was down 0.30%.

Top Holdings

Ticker Security Description Portfolio Weight %
GTBIF GREEN THUMB INDUSTRIES SWAP REC 10.88%
CURLF CURALEAF HOLDINGS INC SWAP REC 10.37%
CRLBF CRESCO LABS INC SWAP REC 10.00%
TCNNF TRULIEVE CANNABIS SWAP REC 9.98%
TRSSF TERRASCEND CORP SWAP REC 7.24%
CCHWF COLUMBIA CARE INC SWAP REC 4.86%
AYRWF RECV AYR STRATEGIES INC 4.83%
JUSHF JUSHI HOLDINGS INC SWAP REC 4.60%
HRVSF HARVEST HEALTH & RECREATION SWAP REC 4.58%
PLNHF PLANET 13 HOLDINGS SWAP REC 4.24%

As of 12.31.2020. Cash is not included.

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

Cheers,

Dan Ahrens
AdvisorShares
AdvisorShares Pure US Cannabis ETF (MSOS) Portfolio Manager

 

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.

The Fund is subject to a number of risks that may affect the value of its shares. This section provides additional information about the Fund’s principal risks. The degree to which a risk applies to the Fund varies according to its investment allocation. Each investor should review the complete description of the principal risks before investing in the Fund. As with investing in other securities whose prices increase and decrease in market value, you may lose money by investing in the Fund.

Cannabis-Related Company Risk. 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 (i) significantly affect a cannabis-related company’s ability to secure financing, (ii) impact the market for marijuana industry sales and services, and (iii) set limitations on marijuana use, production, transportation, and storage. Cannabis-related companies may also be required to secure permits and authorizations from government agencies to cultivate or research marijuana. In addition, cannabis-related companies are subject to the risks associated with the greater agricultural industry, including changes to or trends that affect commodity prices, labor costs, weather conditions, and laws and regulations related to environmental protection, health and safety. Cannabis-related companies may also be subject to risks associated with the biotechnology and pharmaceutical industries. These risks include increased government regulation, the use and enforcement of intellectual property rights and patents, technological change and obsolescence, product liability lawsuits, and the risk that research and development may not necessarily lead to commercially successful products.

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.