MSOS: 1st Quarter 2022 Portfolio Review
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.
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.
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.
|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%|
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.
Past Manager Commentary