YOLO: May 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.
Cannabis stocks have rebounded in a big way. In our opinion, they still have tremendous upside left in front of them. Following solid gains in the previous month of April, YOLO gained 23.34% on its net asset value (NAV) and 24.05% on its market price for the month of May 2020. The S&P 500 Index returned 4.76% for May.
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.
As pointed out last month, in today’s environment YOLO focuses primarily on two things in evaluating cannabis producers:
- Cash of a company’s balance sheet.
- 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. This is why we focus on U.S. companies like Trulieve (OTC: TCNNF – swap), Green Thumb Industries (OTC: GTBIF – swap), and Curaleaf (OTC: CURLF – swap), and Canadians such as Village Farms (NASDAQ: VFF), Aphria (NYSE: APHA), and Organigram (NASDAQ: OGI). We seriously underweight the famous Canadian names Canopy, Tilray, Aurora, and avoid Cronos entirely.
During the month, we reduced the fund’s excess cash and selectively added to positions in Village Farms, Aphria, Innovative Industrial Properties, Inc (NYSE: IIPR), GW Pharmaceuticals, (NYSE: GWPH), Arena Pharmaceuticals (NASDAQ: ARNA) GrowGeneration (NASDAQ: GRWG), and GreenLane Holdings (NASDAQ: GNLN). Remember that as an actively managed fund, we can do things like hold excess cash when markets seem poor and choose to buy selectively in stocks of our choice rather than investing across the board like an index-based fund.
We removed Cara Therapeutics (NASDAQ: CARA) entirely as I no longer consider it a cannabis related company.
Winners and Losers
Almost all holdings were up in the month. Among top ten holdings Village Farms gained 57.2%, Aphria gained 18.19%, GrowGeneration gained 40.64%, Zynerba Pharmaceuticals (NASDAQ: ZYNE) gained 35%. The Fund’s positions in U.S. multi-state operators showed good performance as well – Green Thumb Industries up 42%, Curaleaf up 25%, and Trulieve up 22%.
Even with a very strong overall month, the fund still had losers – both are Canadian firms and relatively small holdings. Medipharm Labs and Cardiol Therapeutics were both down 7% in the month.
|Ticker||Security Description||Portfolio Weight %|
|VFF||VILLAGE FARMS INTERNATIONAL||9.16%|
|IIPR||INNOVATIVE INDUSTRIAL PROPER||8.83%|
|GWPH||GW PHARMACEUTICALS -ADR||7.64%|
|GTBIF||GREEN THUMB INDUSTRIES SWAP REC||5.97%|
|TCNNF||TRULIEVE CANNABIS SWAP REC||5.15%|
|ARNA||ARENA PHARMACEUTICALS INC||5.12%|
|CURLF||CURALEAF HOLDINGS INC SWAP REC||4.76%|
|VLNS||VALENS GROWORKS CORP||4.24%|
As of 05.31.2020. Cash is not included.
Please see our complete Fund holdings at advisorshares.com/etfs/yolo. The holdings details are updated each market day.