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.

Commentary

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:

  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. 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.

Portfolio Update

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.

Top Holdings

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%
APHA APHRIA INC 5.03%
CURLF CURALEAF HOLDINGS INC SWAP REC 4.76%
GRWG GROWGENERATION CORP 4.53%
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.

Cheers,

Dan Ahrens
AdvisorShares
AdvisorShares Pure Cannabis ETF (YOLO) Portfolio Manager

 

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.