MSOS: 4th Quarter 2023 Portfolio 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.

Performance

​Towards the conclusion of Q4, positive developments unfolded in the US Cannabis space. However, for the three-month period encompassed by this commentary (October 1, 2023, through December 31, 2023), there was a decrease of 12.79% in the net asset value (NAV) of MSOS.

Portfolio

The portfolio consistently holds a significant focus in its top holdings in the largest multi-state operators (MSOs). This trend has persisted, with the top five holdings constituting 78.66% of the portfolio at the conclusion of the 1st quarter in 2023, escalating to 82.53% by the end of the 2nd quarter, maintaining at 76.36% by the close of the 3rd quarter, and reaching 82.07% at the end of the 4th quarter in 2023.

New Positions

The portfolio saw a new addition with Schwazze Medicine Man Technologies (SHWZ), acquiring 800,000 shares. Additionally, we actively adjusted weightings to effectively manage the portfolio. As part of this adjustment, one position, Power REIT (PW), was removed from the portfolio.

Winners and Losers

During the quarter, Green Thumb Industries (GTBIF) registered a modest increase of 1.16%, Gold Flora Corp. (GRAM) saw a slight uptick of 1.19%, and Grown Rogue International (GRUSF) experienced a notable surge of 23.91%. However, there were some underperformers this quarter, with Curaleaf Holdings Inc. (CURLF) declining by 11.16%, Truelieve Cannabis (TCNNF) experiencing a decrease of 15.56%, and Terrascend Corp. (TSNDF) with a drop of 20.37%.

Top Holdings

Ticker Security Description Portfolio Weight %
GTBIF GREEN THUMB INDUSTRIES SWAP 28.30%
CURLF CURALEAF HOLDINGS INC SWAP 21.10%
VRNOF VERANO HOLDINGS CORP SWAP 14.86%
TCNNF TRULIEVE CANNABIS SWAP 11.07%
TSNDF TERRASCEND CORP SWAP 6.74%
CRLBF CRESCO LABS INC SWAP 5.34%
AYRWF AYR WELLNESS INC SWAP 3.07%
GLASF GLASS HOUSE BRANDS SWAP 2.84%
CBSTF CANNABIST COMPANY HOLDINGS INC SWAP 2.34%
JUSHF JUSHI HOLDINGS INC SWAP 1.46%

As of 12.31.2023. Cash is not included. Subject to change.

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

Cannabis Landscape

The release of a letter from the Department of Health and Human Services (HHS) recommended the “rescheduling” of cannabis to the Drug Enforcement Agency (DEA). Schedule III would align cannabis with many legal prescription drugs, moving away from its current Schedule I classification, as one of the most dangerous illegal narcotics. While the DEA’s approval is anticipated, the exact timing remains uncertain. However, the DEA acknowledged that they are in the review process, a step perceived by some investors as adding legitimacy, especially after politicians advocated for an expedited approval.

Despite recent positive shifts, cannabis stocks still have a significant journey ahead to reach the levels seen in late 2020 – early 2021. Investors in the cannabis sector remain cautious due to past disappointments regarding cannabis reform from politicians. The potential DEA rescheduling, coupled with the prospect of a “Garland Memo” from the Attorney General, represents key components of an anticipated and coordinated partial legalization of cannabis. The term “partial legalization” implies that the recreational use of cannabis will likely be subject to individual state laws.

While the SAFE or SAFER Banking Act is persistently awaited, the focus has shifted towards the more impactful rescheduling. Notably, DEA rescheduling could profoundly impact the profitability of cannabis companies by alleviating the burdensome 280e tax imposed in the U.S. While the precise timing is still undetermined, the anticipated federal-level reforms are expected to provide clarity on medical and adult-use legality and facilitate listings on major U.S. exchanges, interstate commerce, and full safe harbor for financial services firms.

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To get updates on the funds, tune in to AdvisorShares’ AlphaNooner Show streaming live each regular weekday starting at 12:00 pm (East Coast time), where I am a guest almost every Tuesday. Other important guests from the cannabis world often join too. Find it on most major social media platforms or visit our the AdvisorShares “Events” webpage for more information.

Dan ArensCheers,

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.