MSOS: 2nd Quarter 2021 Portfolio Manager Review

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Commentary

​It’s been frustrating waiting for new catalysts in U.S. cannabis stocks. Whether it’s Canadian or U.S. cannabis stocks, they seemed to hit highs on or about February 10th and have been largely negative since.

The AdvisorShares Pure US Cannabis ETF (NYSE: MSOS) launched on September 2, 2020, with $2.5 million in assets and has been over $1 billion, but ended June with about $950 million in assets under management. Investors need to remember that cannabis stocks are going to be extremely volatile. For cannabis stocks trading over the counter (OTC), the volatility is amplified. U.S. cannabis fundamentals are strong and revenues are growing. While virtually everyone agrees that U.S. cannabis reforms are coming, we simply don’t know the timing and extent. Politicians are politicians and extremely slow.

For the 2md Quarter 2021, MSOS returned -5.54% on its net asset value (NAV) and -5.56% on its market price. The Fund has existed for just-under 10 months as of June 30. Its total cumulative return since inception is 60.86% on NAV and 60.32% on market price.

My thoughts on the remainder of the year are unchanged. From current cannabis stock prices, I expect a scenario we’ve seen before. As we head through year end 2021, there will be a separation in price performance between companies with strong balance sheets and those without, companies with growing revenues and profits vs. those without, and particularly – a separation between U.S. MSOs and Canadian LPs. For this to happen, we don’t necessarily need Federal reform. U.S sales are growing and into a continuously growing list of new locations. Federal reform (which I think will come piecemeal), will simply be a big boost. I think we’ll soon see headway on SAFE Banking as a first domino to fall.

New Positions:

During the quarter, MSOS didn’t add any new positions. We have gradually shifted into even heavier weightings in plant-touching multi-state operations (MSO’s) with a focus on the top 4, 5, or 6 positions. We’ve slightly deceased some smaller positions in the Fund’s lower half.

Contributors / Detractors:

During the 2nd quarter, most of the fund’s holdings had losses. A few bright spots were Innovative Industrial Properties (NYTSE: IIPR) up 6.79%, Green Thumb Industries (OTC GTBIF – swap) up over 13%, and Tessascend (OTC TRSSF – swap), up over 15%.

Losers were significant. Among larger holdings, Curaleaf (OTC CURLF – swap) lost almost 7%, Trulieve (OTC TCNNF – swap) lost over 17%, and Cresco Labs (OTC CRLBF – swap) lost 12%. Two newer positions added in 2021 lost for the 2nd quarter in a row: Verano Holdings (OTC VRNOF – swap) lost over 13% and The Parent Company (OTC GRAMF – swap) was down over 25%.

A number of the Fund’s smaller and / or ancillary holdings actually helped the portfolio by having only slight losses such as Hydrofarm Holdings Group, Inc. (NASDAQ: HYFM), down just 2.01%

Top Holdings

Ticker Security Description Portfolio Weight %
GTBIF GREEN THUMB INDUSTRIES SWAP REC 9.99%
CURLF CURALEAF HOLDINGS INC SWAP REC 8.50%
TCNNF TRULIEVE CANNABIS SWAP REC 7.96%
CRLBF CRESCO LABS INC SWAP REC 6.58%
AYRWF REC AYR WELLNESS INC 5.76%
TRSSF TERRASCEND CORP SWAP REC 5.48%
HRVSF HARVESTHEALTH SWAP R 4.53%
GRWG GROWGENERATION CORP 4.22%
IIPR INNOVATIVE INDUSTRIAL PROPER 4.22%
CURLF CURALEAF HOLDINGS INC SWAP REC 3.79%

As of 06.30.2021. 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

 

Past Manager Commentary

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.