ACT

AdvisorShares Vice ETF

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/fund/act.

October 2018 Portfolio Manager Review


In October, AdvisorShares Vice ETF (NASDAQ: ACT) did exactly what it is designed to do: lose less than the overall market. While the S&P 500 was -6.84% last month, ACT was only -4.84% on its NAV and -5.25% on its market price.

As I’ve said before, we believe AdvisorShares Vice ETF can provide long term outperformance by losing less than the overall market in negative months (lower drawdown), and by providing simple positive returns in up months for the market. Last month, September, was the 6th straight month of positive performance for the Fund. (February & March of this year were negative months for both the Fund and for the S&P 500 Index).   

A few winners: top 10 holding Craft Brew Alliance (NASDAQ: BREW) was up more than 12% for the month. It was down last month, and I bought more. Largest holding Boston Beer (NYSE: SAM) gained 6.88%. Philip Morris International (NYSE: PM) gained more than 8% and Altria (NYSE: MO) gained over 7%. Tobacco company Universal Corp (NYSE: UVV) was up more than 5.6%. PM, MO, and UVV were also up nicely in September. In negative markets or volatile times – beer and tobacco are the place to be (no matter what you think of tobacco on a more personal level).

As I said, we are pleased that the Fund lost less than the overall market in October, but we still certainly had losses – mostly from our more growth-oriented holdings. Stocks we have as cannabis-related holdings AbbVie Inc (NYSE: ABBV) dropped more than 16%, Catalent Inc. (NYSE: CTLT) was down more than 11%, and Corbus Pharmaceuticals Holdings (NASDAQ: CRBP) was also down more than 11%. A handful of stocks we own for alcohol sales (as compared to alcohol producers), were also down in October after being great performers in many prior months. Dave & Buster’s Entertainment (NASDAQ: PLAY) dropped more than 10%. RCI Hospitality (NASDAQ: RICK) was down more than 11%. BJ’s Restaurants (NASDAQ: BJRI) dropped more than 15%.

Also in October, recreational marijuana use was legalized in Canada – and most marijuana stocks dropped straight down through month end. (They have recovered somewhat more recently). Don’t get suckered in to marijuana stock hype. Some people in that business may make huge profits, but many individual investors will lose badly on wild volatility or even on pump and dump stock manipulation. In ACT, we believe we are investing correctly in cannabis by investing only in U.S. federally legal companies that are related to or can profit from the cannabis industry. We are not involved in the Canadian cannabis growers and sellers and the extreme risks that they carry. They are not legal in the U.S. at a federal level.

We’re glad this ugly month of October is behind us, and as I’m writing this – I’m glad these crazy mid-term elections are behind us too. Perhaps we can look forward to a more “normal” market.

Cheers,
Vice (ACT) Portfolio Manager

Dan Ahrens

 


Top 10 Holdings – as of 10.31.2018

Ticker Company Name Portfolio Weight %
SAM BOSTON BEER COMPANY INC-A 5.94%
TPB TURNING POINT BRANDS INC 5.47%
BJRJ BJ'S RESTAURANTS INC 5.24%
ABT ABBOTT LABORATORIES 5.15%
ABBV ABBVIE INC 4.93%
PLAY DAVE & BUSTER'S ENTERTAINMEN 4.92%
LVMUY LVMH MOET HENNESSY-UNSP ADR 4.86%
RICK RCI HOSPITALITY HOLDINGS INC 4.62%
DRI DARDEN RESTAURANTS INC 4.62%
CRBP CORBUS PHARMACEUTICALS HOLDI 4.35%

Investing involves risks including possible loss of principal. 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 significantly affect a cannabis-related company’s ability to secure financing, impact the market for marijuana industry sales and services, and set limitations on marijuana use, production, transportation, and storage. In addition to regulatory action, litigation initiated by private citizens or companies could have a negative impact on the financial and/or operational status of cannabis-related companies. pronouncements from the current Administration suggest the Department of Justice (“DOJ”) may push back against states where marijuana use and possession is legal, step up the enforcement of federal marijuana laws and the prosecution of nonviolent federal drug crimes and, in the event the Rohrabacher- Farr amendment is not renewed by Congress, begin using federal funds to prevent states from implementing laws that authorize medical marijuana use, possession, distribution, and cultivation. Such actions by the DOJ could produce a chilling effect on the industry’s growth and discourage banks from expanding their services to cannabis-related companies where such services are currently limited.

Companies in the food, beverage and tobacco industry are very competitive and subject to a number of risks. Demographic and product trends, changing consumer preferences, nutritional and health-related concerns, competitive pricing, marketing campaigns, environmental factors, adverse changes in general economic conditions, government regulation, food inspection and processing control, consumer boycotts, risks of product tampering, product liability claims, and the availability and expense of liability insurance can affect the demand for, and success of, such companies’ products in the marketplace. For a full summary of the risks please see the prospectus Shares are bought and sold at market price not net asset value (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.

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 anytime thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.

Definition: The S&P 500 Index is a broad-based, unmanaged measurement of changes in stock market conditions based on the average of 500 widely held common stocks. One cannot invest directly in an index.