Cannabis ETFs Struggle, But One Manager Still Sees Opportunity

Marijuana stocks and the related ETFs have recently been taken to task. That includes the AdvisorShares Pure Cannabis ETF (YOLO), which was the first actively managed fund to enter the space when it debuted in April.

YOLO seeks long-term capital appreciation by investing in both domestic and foreign cannabis equity securities. YOLO is designed to fully-invest for pure cannabis exposure under the guidance of a deeply experienced portfolio management team navigating the emerging cannabis marketplace.

YOLO tumbled more than 12% last month, but the fund has over $58 million in assets under management. This underscores investors’ appetite for cannabis investments while making the fund one of this year’s most successful new ETFs.

“Losses in July came from primarily from all the big Canadian growers. Canadian cultivation and distribution companies were really down across the board,” said YOLO portfolio manager Dan Ahrens in a recent commentary. “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.”

Rebound Potential For YOLO

YOLO’s portfolio manager believes that today’s new era can be viewed as akin to post-Prohibition, initiating a growing acknowledgment and understanding of cannabis and its uses among a mainstream audience. The industries that constitute the multi-billion dollar cannabis universe represent a new frontier, where proper caution and due diligence must be exercised surrounding its regulations and risks, in seeking attractive long-term cannabis investment opportunities.

YOLO’s management team added some new positions last month, possibly taking advantage of better pricing in some marijuana names,

Related: Cambria Enters Cannabis ETF Space With Low-Cost ‘TOKE’ 

“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),” said Ahrens.

Recently, YOLO has been reducing its Canada exposure while upping weights to U.S. cannabis names.

“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,” said the portfolio manager.

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