YOLO: April 2020 Portfolio Manager 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/yolo.

Commentary

In the month of April 2020, YOLO gained 11.64% on its net asset value (NAV) and 11.61% on its market price.

With continued healthy gains so far in May, it would not surprise me at all if the mid-March lows could actually be a bottom for cannabis stocks. We’ll see. Back in March, cannabis stocks took a deep dive down along with the overall market with the spread of COVID-19. As it relates to cannabis in particular, it was quickly proven to be an overreaction – of course, extremely common in the cannabis space. Cannabis dispensaries were deemed essential business and remained open. Home delivery and curbside pickup increased dramatically. CBD and marijuana sales have spiked throughout Canada and states where legal in the U.S.

Regardless of if cannabis stocks have actually found a bottom yet, I feel strongly that the cannabis industry will see a separation in performance between the “haves” and the “have nots” followed by industry consolidation. In the current environment, two things are most important for cannabis producers:

  1. Cash of a company’s balance sheet.
  2. Profitability (or a clear path to profitability in the near future).

I firmly believe that it’s easy to differentiate between the cannabis operators that have strong balance sheets and the opportunity for profitability – and those operators with no hope for profitability in the foreseeable future.

Portfolio Update

During the month, we added to positions in Aphria and Organigram, and have further reduced Tilray – one of the Fund’s very smallest positions. Along with the theme of overweighting based on balance sheets and profitability, we already hold large positions in companies like a Trulieve (OTC: TCNNF – swap), Green Thumb Industries (OTC: GTBIF – swap), and Curaleaf (OTC: CURLF – swap).

Of course, our largest holding is the U.S. listed REIT Innovative Industrial Properties, Inc (NYSE: IIPR).

Winners and Losers:

Among YOLO’s top ten holdings, Corbus Pharmaceuticals (NASDAQ: CRBP) gained 23%, Arena Pharmaceuticals gained 16%, Village Farms (NASDAQ: VFF) gained 18.2% and Aphria (NYSE: APHA) also returned 18%. Smaller positions Greenlane Holdings was up a whopping 86%, and Neptune Wellness gained over 75%. The Fund’s positions in U.S. multi-state operators showed nice performance as well – Green Thumb Industries (OTC: GTBIF – swap) up 23%, Cresco Labs (OTC: CRLSF – swap) gained 32%, Curaleaf (OTC: CURLF – swap) gained 19%, and Florida MSO Trulieve (OTC: TCNNF – swap) returned 13%.   

Even with a positive overall month, the Fund still had losers – all of which were Canadian firms. Large holding Organigram (NASDAQ: OGI) dropped 21%, causing us to buy more. Valens GroWorks (TSX: VLNS) lost over 4%. Other losses were from stocks that we already choose to greatly underweight such as HEXO, Emerald Health, Aurora Cannabis, WeedMD, and Green Organic Dutchman.

Top Holdings

Ticker Security Description Portfolio Weight %
IIPR INNOVATIVE INDUSTRIAL PROPER 9.37%
GWPH GW PHARMACEUTICALS -ADR 7.24%
VFF VILLAGE FARMS INTERNATIONAL 6.43%
GTBIF GREEN THUMB INDUSTRIES SWAP REC 5.99%
CRBP CORBUS PHARMACEUTICALS HOLDI 5.70%
CURLF CURALEAF HOLDINGS INC SWAP REC 5.53%
TCNNF TRULIEVE CANNABIS SWAP REC 5.23%
OGI ORGANIGRAM HOLDINGS INC 4.49%
VLNS VALENS GROWORKS CORP 4.47%
APHA APHRIA INC 4.45%

As of 04.30.2020. Cash is not included.

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

Cheers,

Dan Ahrens
AdvisorShares
AdvisorShares Pure Cannabis ETF (YOLO) 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.