MSOS: 1st Quarter 2022 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

​Negative. Difficult. Brutal. Cannabis stocks overall have been negative again. Since hitting highs on about February 10, 2021, cannabis stocks have experienced a drawdown that has now lasted over 14 months.

For the three-month period that this commentary covers of January 1 through March 31, 2022, MSOS dropped another -18.24% on its net asset value (NAV) and -18.49% on its market price. Obviously, the losses since the February 2021 highs have been much worse. There are many theories for the continued decline and a number of factors combining for negativity. In addition to an extremely slow and unpredictable U.S. Federal cannabis reform process, the cannabis companies we invest in are mostly Over-the-Counter stocks, thinly traded and subject to short selling pressure with relatively low volume of trades. Of late, overall stock market performance, inflation and other macro events may simply be causing additional “risk off” trades and selling pressure.

Portfolio

Assets

Despite negative performance of cannabis investments, the Fund’s assets have held fairly steady with total outstanding shares continuing to be near highs. While the Fund has declined in value, we haven’t experienced outflows. Somehow, I believe it shows investor’s patience and belief in the future potential of U.S. cannabis. While the losses are still very painful, at times we’ve had the ability to buy more underlying shares at lower prices. We have been able to lower the cost basis of our highest conviction positions. The Fund continues to hold very high concentrations in our 5 and 10 largest positions.

New Positions

During the quarter, no new positions were added to MSOS. We have added to existing positions while trimming some ancillary names from the portfolio. In late 2021, many investors noticed that we held a larger-than-usual cash position, which helped at least a little bit to soften Fund losses. In this past quarter, we used that cash to add to existing MSO positions somewhat consistently. Unfortunately, it did little or nothing to help those individual stocks’ performance.

Winners and Losers

During the quarter, most of the fund’s holdings had losses. The Fund’s returns were driven mostly by large concentrations in top holdings in the largest multi-state operators (MSOs). Trulieve was down -19.07%, Green Thumb lost -15.84%, Curaleaf lost -19.67%, and Verano -20.99%. Some others actually helped by “losing less”, such as AYR at -12.71%, Jushi -11.72% and Cresco Labs -9.97%. A few hard to come by bright spots were Urban-Gro (NASDAQ: UGRO) gaining 2.48% and RIV Capital (CSE: RIV) up 1.13%. Among the plant-touching MSOs, some that helped overall Fund performance with gains were smaller companies such as Goodness Growth (on buyout news) up 21.35%, Lowell Farms up 15.72%, C21 Investments up 15.02%, and Glass House 30.46% in Q1 2022. I wish we’d owned more of those so-called Tier 3’s.

Top Holdings

Ticker Security Description Portfolio Weight %
GTBIF GREEN THUMB INDUSTRIES SWAP REC 12.01%
TCNNF TRULIEVE CANNABIS SWAP REC 10.45%
CURLF CURALEAF HOLDINGS INC SWAP REC 8.06%
IIPR INNOVATIVE INDUSTRIAL PROPER 6.96%
VRNOF VERANO HOLDINGS CORP SWAP REC 6.81%
CRLBF CRESCO LABS INC SWAP REC 5.85%
TCNNF TRULIEVE CANNABIS SWAP REC 4.38%
AYRWF REC AYR WELLNESS INC 4.13%
TRSSF TERRASCEND CORP SWAP REC 3.92%
GRWG GROWGENERATION CORP 3.43%

As of 03.31.2022. 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.

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.

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.