You know what they say: 'If it sounds too good to be true, it probably is.'
As an investor in the cannabis industry, I've learned to always tread carefully and do my due diligence. Recently, I stumbled upon something that raised some serious concerns. It seems that the cannabis ETF known as MSOS may not be living up to its promises.
In this article, I'll be delving into the issues surrounding MSOS and why fellow investors should be wary. From a lack of diversification to a stagnant share count, there are red flags that cannot be ignored.
So, let's delve into the details and explore alternative options for investing in the cannabis industry.
Key Takeaways
- Global Cannabis Stock Index has experienced a decline of 16.5% in 2023, while the S&P 500 has seen a rise of 16.6%.
- MSOS, an ETF focused on US cannabis stocks, has a lack of diversification with 79% exposure to Green Thumb Industries and Curaleaf, which are not attractive investment options.
- MSOS share count has increased by 2.6% since year-end and is up 19.9% compared to a year ago, raising concerns about potential redemptions and the stability of the ETF.
- MSOS is not recommended for cannabis investors due to the fund manager's lack of competence, and investors should consider buying individual stocks for better diversification and cost-saving benefits.
Performance of Cannabis Stocks in 2023
In 2023, cannabis stocks took a hit, with the global cannabis stock index experiencing a decline of 16.5%. This decline in the cannabis stock market can be attributed to various factors, including increased regulatory scrutiny and concerns about profitability.
When analyzing the performance of ETFs in the cannabis industry, it's evident that the AdvisorShares Pure US Cannabis ETF has also been negatively affected. This ETF has seen significant declines, reflecting the overall downward trend in the cannabis market.
It's crucial for investors to carefully consider the performance of ETFs like this one before making investment decisions. By analyzing cannabis stock market trends and the performance of ETFs, investors can make informed choices that align with their investment goals and risk tolerance.
Issues With MSOS Lack of Diversification
I have concerns about the lack of diversification in MSOS, a cannabis ETF. The concentration risk in this ETF is quite significant, with 79% exposure to just two companies, Green Thumb Industries and Curaleaf. These stocks don't represent a significant portion of the industry by revenue or market cap, making them less attractive investment options.
Additionally, Verano Holdings, another company in which MSOS is heavily invested, is also not recommended. The lack of industry representation and the high concentration in just a few companies should turn investors away from MSOS.
It's important for investors to carefully consider the potential risks associated with lack of diversification before investing in this ETF.
Stabilization of MSOS Share Count
The share count of MSOS, a cannabis ETF, has stabilized since its peak in December. This is a positive development for investors who were concerned about the overall stability of the fund.
As of now, the share count has increased by 2.6% since year-end, which is a relatively modest growth rate. However, compared to a year ago, the share count is up by 19.9%, indicating some level of expansion.
The lack of significant growth in the share count may raise concerns among investors, especially considering the potential impact of redemptions. If there are a large number of redemptions, it could put pressure on the ETF and potentially impact its overall performance.
Therefore, it's important for investors to closely monitor the stability of MSOS and assess the potential risks associated with redemptions.
Conclusion on MSOS as an ETF
After evaluating the performance and stability of MSOS as an ETF, it's evident that this investment option for cannabis investors falls short in several key areas:
- Fund manager incompetence: The lack of diversification in MSOS, with 79% exposure to just two companies, shows a lack of competence on the part of the fund manager. This concentration in a few companies should turn investors away.
- Drawbacks of investing in individual stocks: While buying individual stocks may provide more control over investment choices, it also comes with its drawbacks. Investors would need time and knowledge to research and select the right stocks. Additionally, lack of access to over-the-counter stocks may lead some investors to choose the ETF option.
- Lack of better investment options: MSOS focuses solely on American cannabis companies, neglecting other investment opportunities in the cannabis industry. Investors should consider alternative options that provide better diversification and potentially lower management fees.
Alternative Options for Investing in the Cannabis Industry
For cannabis investors, there are alternative options available for investing in the cannabis industry.
One option is to directly purchase individual cannabis stocks instead of relying on an ETF like MSOS. Owning individual stocks allows for more control over investment choices and eliminates the need to pay management fees associated with the ETF.
Additionally, investors can consider investing in over-the-counter stocks, which may provide access to a wider range of cannabis companies. However, it's important to note that investing in individual stocks requires time and knowledge, which some investors may not have.
In such cases, investing in an ETF like MSOS may still be a viable option. Ultimately, the decision to invest in the cannabis industry should be based on individual preferences, risk tolerance, and investment goals.
Frequently Asked Questions
What Is the Historical Performance of the Advisorshares Pure US Cannabis ETF (Msos)?
The historical performance analysis of the AdvisorShares Pure US Cannabis ETF (MSOS) shows that it falls short compared to other cannabis ETFs.
How Does the Concentration of Green Thumb Industries and Curaleaf in MSOS Compare to Other Cannabis Etfs?
The concentration of Green Thumb Industries and Curaleaf in MSOS is high compared to other cannabis ETFs. This can have a significant impact on the overall portfolio performance, potentially limiting diversification and increasing risk.
What Factors Contribute to the Lack of Growth in Msos's Share Count?
Several factors contribute to the lack of growth in MSOS's share count. Regulatory hurdles, such as restrictions on cannabis companies, can hinder the ETF's ability to attract new investors and increase its share count.
Are There Any Potential Risks Associated With Potential Redemptions of MSOS Shares?
The potential risks of MSOS redemptions could have a significant impact on the cannabis market. If investors start redeeming their shares, it could lead to a decrease in the fund's assets and potentially affect the overall performance of the industry.
What Are the Advantages of Buying Individual Cannabis Stocks Instead of Investing in the MSOS Etf?
The advantages of buying individual cannabis stocks over the MSOS ETF include more control over investment choices, avoiding ETF expenses, and potentially better diversification. However, it requires time and knowledge to invest in individual stocks.