MSOS: 1st Quarter 2021 Portfolio Manager Review
AdvisorShares Pure US Cannabis ETF (NYSE: MSOS) launched on September 2, 2020 with $2.5 million in assets but ended March with over $1 billion. It remains the only U.S. listed ETF focused solely on the U.S. cannabis market and has enjoyed tremendous investor interest.
For the three month period that this commentary covers from January 1 through March 31, 2021, MSOS gained 17.25% on its net asset value (NAV) and 16.40% on its market price. The Fund has existed for just under six months as of March 31, but its cumulative return since inception is 70.30% on NAV and 69.76% on market price. While these high returns may not be sustainable all the time, we are optimistic for future growth in the space.
The 1st quarter of 2021 was a rather wild ride. Strong enthusiasm for U.S. cannabis reform carried over from late 2020 and into January. Perhaps too much enthusiasm. The bulk of cannabis stocks hit highs in the first part of February and suffered an overall downtrend since. Although it’s hard to explain why, U.S. cannabis stocks underperformed versus their Canadian counterparts. We don’t expect it to continue. Some theories are that U.S. stocks just “got out in front of themselves” with a huge run up in late 2020 and the start of 2021. I believe it is that combined with the fact that federal reform is moving much slower than expected. Also, the fact that most of U.S. cannabis is still thinly traded in the Over-the-Counter market simply makes market moves “exaggerated.”
From current cannabis stock prices, I’m once again expecting a scenario we’ve seen before. As we head through 2021, I think 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.
During the quarter, MSOS added new securities Hydrofarm Holdings Group, Inc. (NASDAQ: HYFM) and Hempfusion Wellness Inc. (TSX: CBD.u). We also increased U.S. multi-state operator names by adding Verano Holdings (OTC VRNOF – swap), Bluma Wellness (OTC BMWLF – swap), and The Parent Company (OTC GRAMF – swap), although we previously held GRAMF’s predecessor Subversive Capital SPAC. Bluma is simply a price arbitrage play as they have a previously announced deal to be acquired by Cresco Labs.
Winners and Losers:
During the 1st quarter, most of the fund’s largest holdings were solidly positive, but most of the gains came in January, followed by a swoon in February & March.
Some non-MSO holdings were among top performers for the quarter. Power REIT (NYSE American: PW) was up 69%. GrowGeneration (NASDAQ: GRWG) was up 23% and GreenLane Holdings (NASDAQ: GNLN) gained 33%. CBD focused companies Charlotte’s Web (TSX: CWEB) gained 36%, and cbdMD (NYSE American: YCBD) was up 40%.
Actual multi-state operators were a mixed bag in the quarter. The “Big Four” (or big 5 or 6) didn’t lead the way, but they weren’t bad either. In our top four holdings, Curaleaf (OTC CURLF – swap) gained 26%, Trulieve (OTC TCNNF – swap) gained over 43%, and Green Thumb Industries (OTC GTBIF – swap) gained over 20%, and Cresco Labs (OTC CRLBF – swap) gained 26%.
On the other hand, Terrascend (OTC TRSSF – swap) was only up 1.29% total for the 3-month period. Others like Planet 13, Jushi, and Columbia Care also had just single digit returns.
Winners definitely outnumbered the losers, but there were losers. A number of the main losers were also new positions to the Fund, so we feel we may have had a good entry point. Hydrofarm Holdings Group, Inc. (NASDAQ: HYFM) and Hempfusion Wellness Inc. (TSX: CBD.u were both negative for the quarter. Verano Holdings (OTC VRNOF – swap) lost over 23% for the full quarter and The Parent Company (OTC GRAMF – swap) was down over 26% for the full quarter. Existing positions in C21 Investments (OTC CXXIF – swap) at -4.96% and Vext Science (OTC VEXTF– swap) at -6.43% were also a drag to the Fund.
|Ticker||Security Description||Portfolio Weight %|
|TCNNF||TRULIEVE CANNABIS SWAP REC||9.09%|
|CURLF||CURALEAF HOLDINGS INC SWAP REC||8.59%|
|GTBIF||GREEN THUMB INDUSTRIES SWAP REC||8.39%|
|CRLBF||CRESCO LABS INC SWAP REC||6.79%|
|AYRWF||REC AYR WELLNESS INC||5.72%|
|IIPR||INNOVATIVE INDUSTRIAL PROPER||4.99%|
|TRSSF||TERRASCEND CORP SWAP REC||4.58%|
|HRVSF||HARVESTHEALTH SWAP R||3.64%|
|CCHWF||COLUMBIA CARE INC SWAP REC||3.49%|
As of 03.12.31.2021. Cash is not included.
Please see our complete Fund holdings at advisorshares.com/etfs/msos. The holdings details are updated each market day.