YOLO: 3rd Quarter 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 3rd quarter of 2020, YOLO continued its 2020 rebound with solid performance. For the 3-month period  of July – September, 2020, YOLO gained  6.60%, despite a negative September. The North American Marijuana Index was -2.63% for the same time frame. (At the time of this writing, YOLO is up well in October). In the previous 3-month period of April – June 2020, YOLO gained 32%.

As we approach the November election, we’re continuing to see increased interest in U.S. cannabis markets and the multi-state operators in particular. Continued U.S. cannabis regulatory approvals and expansion are expected. In the particularly interesting states of New Jersey and Arizona, voters are expected to approve recreational adult use cannabis. New York and Pennsylvania are renewing calls for legislative action for approval in the near future as well. U.S. multi-state operators (M.S.O.s) should thrive. Investors need to understand that the Democratic Party platform isn’t call for full federal legalization, but rather, cannabis decriminalization. I expect cannabis banking reform, continued expansion of medical marijuana, and the strengthening of recreational cannabis at a state level. Reforms will happen so that state cannabis laws will not be contrary to federal law.  Without full federal legalization and open border laws, Canadian LPs will remain “Canadian.” I don’t expect them gaining the ability to do business in the U.S. for the foreseeable future.

Winners and Losers:

During the 3rd quarter, many for the Fund’s largest holdings were among the very best performers – and they are U.S. focused.  GrowGeneration (NASDAQ: GRWG) was up 133% for the 3-month period.  Innovative Industrial Properties, Inc (NYSE: IIPR) gained over 42%. M.S.O. positions in our top ten holdings also performed very well in the quarter. Curaleaf gained 18%, Trulieve gained over 43%, and Green Thumb Industries gained over 26%. 

While the Fund was up in the 3rd quarter, we actually had more losers than winners. We simply had the best companies overweight for the most part, and losers often quite underweighted. Significant negative returns in the 3-month timeframe came from, pharmaceutical company Corbus (NASDAQ: CRBP) down 78%, Greenlane Holdings down 43%, Charlotte’s Web Holdings (TSX: CWEB) down 39%, Power REIT (NYSE American: PW) down 31%, and even GW Pharma (NASDAQ: GWPH) down 20% . The Fund’s other biggest losers were all Canadian cannabis companies – again – that we purposely hold in only tiny positions. Among all the Canadian losers was the poster-child, Aurora (NYSE: ACB), down another 63% for 3 months.

Top Holdings

Ticker Security Description Portfolio Weight %
VFF VILLAGE FARMS INTERNATIONAL 11.57%
IIPR INNOVATIVE INDUSTRIAL PROPER 11.41%
GWPH GW PHARMACEUTICALS -ADR 7.65%
GRWG GROWGENERATION CORP 5.87%
APHA APHRIA INC 5.76%
ARNA ARENA PHARMACEUTICALS INC 5.75%
GTBIF GREEN THUMB INDUSTRIES SWAP REC 5.04%
TCNNF TRULIEVE CANNABIS SWAP REC 4.87%
CURLF CURALEAF HOLDINGS INC SWAP REC 4.83%
CRLBF CRESCO LABS INC SWAP REC 3.99%

As of 9.30.2020. 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.