“YOLO is outperforming for two reasons,” Ahrens said. “One is active management. We’re picking the right stocks at the right time better than an index can, in my opinion. The other reason relates to our U.S. exposure in that we’re the only fund with exposure to those MSOs."
And the new MSOS fund will have greater exposure to MSOs, making it a more expansive entrée to the U.S. market. Which begs the question whether MSOS makes YOLO superfluous.
Ahrens, of course, doesn’t think so. “YOLO has some global exposure combined with U.S. exposure. MSOS is 100% U.S.-focused. That provides diversification within one’s cannabis exposure.”
He envisions any cannabis fund to be a growth-oriented satellite position within the equity portion of an investor’s portfolio. But given the rough going so far in the cannabis patch, investors can’t be blamed for being skeptical about the industry’s much-promised growth potential.
“There’s no denying in the second half of ’19 into the early months of ’20 that the entire group of cannabis stocks was down dramatically,” he said. “This is a very new industry with lots of volatility that’s regulatory related. But maybe the selling was overdone, and these stocks were severely shorted across the board.”
Indeed, the sector has rebounded—as has the rest of the U.S. equity market—since its nadir in late March. Is this a case of the proverbial high tide lifting all boats, or does the pot trade have staying power?
Ahrens expects the outlook in Canada to improve as the country opens more retail outlets for recreational weed. And he and others are bullish on the prospects of greater marijuana legalization in states across the U.S.
Investors have heard that line before, but it does appear the cannabis legalization train in the U.S. will inevitably pick up speed, and that could benefit investors with a long-term outlook.