YOLO: July 2019 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/fund/yolo.
Since its launch on April 18 of this year, AdvisorShares Pure Cannabis ETF (NYSE Arca: YOLO) has continued to experience in-flows of new investor money each month, even though cannabis stocks as a whole have obviously been down, again, in the past month and overall in the time since our launch.
For the month of July, the Fund returned -12.34% on a market price basis and -12.43% its net asset basis. The S&P 500 Index had small gains in July of 1.44% for the month.
The Fund’s July 31 top 10 holdings are listed below. Some positive performance came from areas outside of the typical Canadian cultivation companies. Neptune Wellness (NASDAQ: NEPT) is a top Canadian extraction and purification company. Charlotte’s Web (TSX: CWEB) is a U.S CBD / cannabidiol company. Cara Therapeutics (NASDAQ: CARA) and Arena Pharmaceuticals (NASDAQ: ARNA) are U.S. based biotech companies doing great work with cannabinoids. You’ll also notice a position we started in June but increased into our top-10 holdings in July – Curaleaf Holdings Inc. is a position we hold via a total return swap contract, rather than holding as a stock. Curaleaf is now the world’s largest cannabis company as measured by sales revenue, but it is a U.S. based multi-state operator (MSO). As I’ve said before, we feel United States cannabis growth potential is many times that of Canada, and we feel U.S. investment exposure is extremely important.
Losses in July came from primarily from all the big Canadian growers. Canadian cultivation and distribution companies were really down across the board. We’re seeing somewhat of a bounce back in some of the cultivation names in early August, although we’ll need a lot more before I’m happy. As I’ve stated before, as an actively managed fund – while we own most of the large Canadian growers, some we choose to avoid completely, but most we choose to underweight versus what a market-cap weighted index would call do. Our top holding, Innovative Industrial Properties (NYSE: IIPR), was down as well in July but has been a terrific performer in prior months. We like it at current levels.
|Top 10 Holdings||Ticker||Portfolio Weight||July 2019 Return|
|INNOVATIVE INDUSTRIAL PROPERTIES||IIPR||6.28%||-14.48%|
|ORGANIGRAM HOLDINGS INC||OGI||5.49%||-7.33%|
|VILLAGE FARMS INTERNATIONAL||VFF||5.21%||-0.09%|
|NEPTUNE WELLNESS SOLUTIONS||NEPT||4.81%||31.81%|
|CURALEAF HOLDINGS INC (SWAP)||CURLF.SWAP||4.68%||10.73%|
|CHARLOTTES WEB HOLDINGS INC||CWEB||4.36%||20.80%|
|CANOPY GROWTH CORP||CGC||4.22%||-18.56%|
|CARA THERAPEUTICS INC||CARA||3.77%||11.35%|
|ARENA PHARMACEUTICALS INC||ARNA||3.61%||6.91%|
As of 07.31.2019. Cash holdings not included.
Because we actively manage the fund to take advantage of opportunities and limit risks, I hope you’ll notice that our top 10 holdings aren’t too large. We seek to opportunistically take profits on “winners” from time to time and to control position sizes, thus limiting risk.
During the month of July, we added new positions to the fund in Harvest Health (HRVSF.SWAP), cbdMD Inc (NYSE: YCBD), and Medipharm Labs Corp (TSXV: LABS).
In early July, we reduced our position in IIPR after it had large gains. We also somewhat reduced winners NEPT, CARA and ARNA. While not winners, we also reduced Organigram Holdings (TSXV: OGI) and a number of other Canadian growers. We increased U.S. exposure in a number of positions while decreasing Canadian holdings. As an actively managed ETF we trade in a tax efficient manner with care and expertise – as compared to index-following ETF’s that are forced to blindly rebalance on a fixed schedule and scale each month or quarter.
Please see our complete Fund holdings at etf.as/YOLO. The holdings details are updated each market day.
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.
There is no guarantee that the Fund will achieve its investment objective.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.