November 02, 2021 - 11:56pm EST by
2021 2022
Price: 26.88 EPS 0 0
Shares Out. (in M): 27 P/E 0 0
Market Cap (in $M): 738 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 0 TEV/EBIT 0 0

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While the market is in a frenzy chasing the latest speculative bubble, there is a compelling deep value investment opportunity hiding in plain sight: US cannabis operators. The easiest way to express that thesis is to purchase MSOS, the AdvisorShares Pure US Cannabis ETF. This ETF was launched in the fall of 2020 and now has approximately $900mil of AUM and $17mil avg daily trading volume.


The current MSOS holdings can be seen here: The holdings are largely comprised of plant-touching US multi-state operators (MSOs). The expense ratio of 0.74% is relatively modest, and the ETF provides a good diversification across the industry. Moreover, the ETF trades in the US and offers US investors a vehicle to get exposure to MSOs who are otherwise restricted from owning plant-touching US cannabis company securities. MSOS has obtained an opinion from counsel and been through a rigorous listing process to get the ETF listed in the US. The ETF doesn’t actually own any plant-touching cannabis companies directly. Rather, the ETF owns total return swaps on MSO securities. We would also recommend owning specific individual underlying securities directly, but MSOS is a good investment vehicle to capture the potential upside available in the US cannabis market today, especially for those who are restricted from owning plant-touching securities. Please refer to some of the previous VIC writeups of cannabis securities: VRNOF, AYRWF, TCNNF, GRAMF, LHS, NLCP, etc.


It’s very rare to have this combination of strong secular tailwinds and depressed valuations that we are seeing in the US cannabis industry. Usually, companies operating with a secular tailwind like this trade at far higher multiples.


For a good summary of the US cannabis opportunity, we would recommend reading the following recent blog posts:


Here are some charts and excerpts regarding the current opportunity in US cannabis: 

MSOS started trading in the fall of 2020 at $25/share. MSOS is at $27/share now. Meanwhile MSOs trade @ ~7.6x 2022 EV/EBITDA vs. 15.0x nine months ago.