YOLO: June 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

After a big cannabis stock rebound in April and May following COVID-19, cannabis stocks overall decreased somewhat again in June. YOLO returned -4.12% on its net asset value (NAV) and -4.18% on its market price in June. The S&P 500 Index was slightly positive. For the past 3 months, April 1 through June 30, 2020, YOLO gained 32.74% on its net asset value (NAV) and 31.94% on its market price, while the S&P returned 20.54%.

Since the COVID-19 related lows in March, cannabis stocks as a group have moved up dramatically, but I’d like to remind everyone that cannabis could still have plenty of upside potential. Cannabis stocks were down severely in 2019 and the early months of 2020. Early in the COVID-19 crisis, cannabis dispensaries were deemed essential business and have remained open. CBD and marijuana have sold at record levels throughout Canada and legal states in the U.S.

During the past month or so, we have seen increased interest in U.S. cannabis and multi-state operators in particular as we are entering the 2020 election cycle. It’s widely anticipated that we’ll continue to see U.S. cannabis regulatory approvals and expansion. YOLO is the only cannabis ETF to offer exposure to U.S. multi-state operators. We believe the best future cannabis opportunities are in the United States. On the other hand, continued U.S. expansion should do NOTHING for Canadian cannabis companies.

Portfolio Changes:

During the month, we further reduced the fund’s excess cash and selectively added to positions in U.S. Multi-state operators Trulieve (OTC: TCNNF – swap), Green Thumb Industries (OTC: GTBIF – swap), Curaleaf (OTC: CURLF – swap), and in Canadian firms Village Farms (NASDAQ: VFF) and Organigram (NASDAQ: OGI). Unlike many Canadian cannabis companies, we like the balance sheets and profitability profiles of both VFF and OGI.

Winners and Losers:

During June, the Fund has more losers than winners. A handful of stocks were positive. A top holding, Innovative Industrial Properties, Inc (NYSE: IIPR) gained 8.97%. cbdMD Inc. (NYSE: YCBD) was up more than 29%. Ancillary cannabis supporter Greenlane Holdings (NASDAQ: GNLN) gained 15.7%. Pharma companies Corbus (NASDAQ: CRBP) was up 12.47% and Arena (NASDAQ: ARNA) gained 5.32%. A few other gainers had minor impacts.

On the negative side, Zynerba Pharmaceuticals (NASDAQ: ZYNE) was down 35.93% in June based on clinic trial news. We have reduced our position. ZYNE did gain 35% the prior month in May. Charlotte’s Web Holdings (TSX: CWEB) was down more than 29% based on additional stock issuance. We used that news to buy more shares. The Fund’s other biggest detractors from performance were all Canadian cannabis companies

Top Holdings

Ticker Security Description Portfolio Weight %
VFF VILLAGE FARMS INTERNATIONAL 9.17%
GWPH GW PHARMACEUTICALS -ADR 8.06%
GTBIF GREEN THUMB INDUSTRIES SWAP REC 6.63%
CURLF CURALEAF HOLDINGS INC SWAP REC 6.26%
TCNNF TRULIEVE CANNABIS SWAP REC 6.06%
ARNA ARENA PHARMACEUTICALS INC 5.68%
APHA APHRIA INC 5.38%
GRWG GROWGENERATION CORP 4.94%
OGI ORGANIGRAM HOLDINGS INC 4.20%

As of 06.30.2020. 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.