MSOS: The Dominos Are Falling

seekingalpha05-21

AdvisorShares Pure US Cannabis ETF invests in the cannabis industry through direct investments and derivatives.The top holdings of the ETF include Green Thumb Industries, Curaleaf Holdings, Trulieve ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2437100045?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1516290144/image_1516290144.jpg","is_english":true,"pubTime":"2024-05-21 00:48","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2437100045","market":"sh","top_or_hot":-1,"title":"MSOS: The Dominos Are Falling","media":"seekingalpha","content":"<div>\n<p>AdvisorShares Pure US Cannabis ETF invests in the cannabis industry through direct investments and derivatives.The top holdings of the ETF include Green Thumb Industries, Curaleaf Holdings, Trulieve ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694561-msos-the-dominos-are-falling\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>MSOS: The Dominos Are Falling</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMSOS: The Dominos Are Falling\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-21 00:48 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4694561-msos-the-dominos-are-falling><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>AdvisorShares Pure US Cannabis ETF invests in the cannabis industry through direct investments and derivatives.The top holdings of the ETF include Green Thumb Industries, Curaleaf Holdings, Trulieve ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694561-msos-the-dominos-are-falling\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"ACRHF","symbol_name":"Acreage Holdings Inc.","start_time":0,"source_url":"https://seekingalpha.com/article/4694561-msos-the-dominos-are-falling","article_id":"2437100045","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1516290144/image_1516290144.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2437100045","pubTimestamp":1716223693,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"AdvisorShares Pure US Cannabis ETF invests in the cannabis industry through direct investments and derivatives.The top holdings of the ETF include Green Thumb Industries, Curaleaf Holdings, Trulieve C","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"ACRHF":"Acreage Holdings Inc.","AYRWF":"AYR WELLNESS INC.","BK4007":"制药","FFNTF":"4Front Ventures Corp.","CSA":"VictoryShares US Small Cap Volatility Wtd","BK4557":"大麻股","CBSTF":"THE CANNABIST COMPANY HOLDINGS INC.","MSOS":"AdvisorShares Pure US Cannabis ETF","AAWH":"Ascend Wellness Holdings, Inc.","VEXTF":"Vext Science Inc.","GRUSF":"Grown Rogue International Inc.","CNPOF":"RIV CAP INC.","CRLBF":"Cresco Labs Inc.","SHWZ":"Medicine Man Technologies Inc.","CURLF":"Curaleaf Hldgs Inc.","BK4135":"资产管理与托管银行","BK4183":"个人用品","CXXIF":"C21 Investments Inc.","LOWLF":"LOWELL FARMS INC.","GTBIF":"Green Thumb Industries Inc.","GDNSF":"Goodness Growth Holdings, Inc.","TCNNF":"Trulieve Cannabis Corporation","MRMD":"MariMed Inc.","TSNDF":"TerrAscend Corp.","VRNOF":"Verano Holdings Corp.","JUSHF":"Jushi Holdings Inc.","GRAM":"GOLD FLORA CORP."},"translate_title":"MSOS：多米诺骨牌正在倒下","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"FFNTF":1,"VRNOF":1,"VEXTF":1,"TSNDF":1,"TCNNF":1,"SHWZ":1,"MSOS":1,"MRMD":1,"LOWLF":1,"JUSHF":1,"GTBIF":1,"GRUSF":1,"GRAM":1,"GDNSF":1,"AAWH":1,"CXXIF":1,"CURLF":1,"CSA":1,"CRLBF":1,"CNPOF":1,"CBSTF":1,"AYRWF":1,"ACRHF":1},"content_text":"AdvisorShares Pure US Cannabis ETF invests in the cannabis industry through direct investments and derivatives.The top holdings of the ETF include Green Thumb Industries, Curaleaf Holdings, Trulieve Cannabis, and Verano Holdings.The industry stands to benefit greatly from the removal of the 280e tax obligation due to rescheduling from 3 to 1.The process of rescheduling has been in motion since late 2022 and is approaching completion.I presently rate MSOS as a Buy.   YaryginThesis With the federal government currently in the process of changing the laws around cannabis, companies in the industry in the United States are expected to receive tax relief and become more profitable. Investments in this industry have the potential to experience considerable alpha as markets adjust their outlook on the future of the industry. On October 6th 2022, the Biden administration asked the DHHS and the DEA to explore the possibility of rescheduling cannabis from schedule 1 to a designation which makes more sense based on our present understanding of its characteristics. The DHHS released its findings that it should be moved to schedule 3 on August 29th, 2023. On April 30th, 2024, the Associated Press reported that the DEA will move to reclassify marijuana as a less dangerous drug. On May 16th, the Attorney General submitted to the Federal Register a notice of proposed rulemaking initiating a formal rulemaking process to consider moving it from a schedule I to schedule III drug under the Controlled Substances Act (CSA). On the same day, the Biden administration released a statement on Twitter/X endorsing the move to schedule 3. Overall, sentiment in the industry has risen significantly since my article on MSOS last November. I believe this is going to be comparable to investing into the alcohol industry at the end of its prohibition in 1933. Once the rules of the game are changed, the players will adapt their strategies and the most competitive ones will find themselves in dominant positions as the industry evolves into its mature state. Fund Background AdvisorShares Trust - AdvisorShares Pure US Cannabis ETF (NYSEARCA:MSOS) mostly uses swaps to create its portfolio. This actively managed fund was established on September 1, 2020, and charges an annual operating expense of 0.86%. They offer a waiver of 0.03% which brings the net fees down to 0.83%. In order to make it into the fund, companies need to derive at least 50% of their net revenue from the United States cannabis industry. Holdings These values have changed since my last article, but Green Thumb and Curaleaf are still the top two holdings. The 3rd and 4th largest weightings, Trulieve and Verano have changed places, and the 5th and 6th largest weightings TerrAscend and Cresco have done the same. With the top 5 holdings taking up 82.91% and the top 6 holdings taking up 88.48%, the fund is quite concentrated. These are the weightings as of May 17th, 2024: Green Thumb Industries (OTCQX:GTBIF) is at 23.39% Curaleaf Holdings (OTCPK:CURLF) is at 21.90% Trulieve Cannabis (OTCQX:TCNNF) is at 18.38% Verano Holdings (OTCQX:VRNOF) is at 13.19% Cresco Labs (OTCQX:CRLBF) is at 6.05% TerrAscend Corp. (OTCQX:TSNDF) is at 5.57% Glass House Brands (OTC:GLASF) is at 3.44% Ayr Wellness (OTCQX:AYRWF) is at 2.79% Jushi Holdings (OTCQX:JUSHF) is at 1.29% Cannabist Company (OTCQX:CBSTF) is at 1.01% Planet 13 Holdings (PLNHF) is at 0.79% Ayr Rights Offering (AYRWU) is at 0.41% 4Front Ventures (OTCQX:FFNTF) is at 0.39% C21 Investments (OTCQX:CXXIF) is at 0.37% Goodness Growth (OTCQX:GDNSF) is at 0.37% Ascend Wellness (OTCQX:AAWH) is at 0.22% Grown Rogue International (OTCPK:GRUSF) is at 0.13% Vext Science (OTCQX:VEXTF) is at 0.10% Schwazze Wellness (OTCQX:SHWZ) is at 0.10% MariMed (OTCQX:MRMD) is at 0.10% Gold Flora Corp (OTCPK:GRAM) is at 0.09% Acreage Holdings (OTCQX:ACRHF) is at 0.09% RIV Capital (OTCPK:CNPOF) is at 0.04% Lowell Farms (OTCQB:LOWLF) is at 0.00% Hempfusion Wellness (OTC:CBDHF) is at 0.00% Present Fundamentals These are the top 6 holdings listed by market cap. MSOS Top 6 Holdings (Seeking Alpha)Curaleaf, Trulieve, and Verano all have attractive free cash flow margins. Curaleaf appears to be the most overvalued while Trulieve appears to be the most undervalued. Cresco Labs and Trulieve have both lost revenue, and over the last year, TerrAscend has grown revenue by more than any of the others. Post-Rescheduling Currently, prices in the United States vary significantly from state to state. The present federal laws prevent interstate sales, so each of these states are currently operating as their own separate ecosystems. Cannabis Prices By State (Oxfordtreatment.com)All of these companies are currently suffering from having to pay taxes under 280e. Once cannabis is reclassified to schedule 3, this tax obligation will go away and they will be able to take deductions and pay taxes at the normal rate based off their net income. Taking a look at the highest weighting holdings, it's clear that these companies stand to become significantly more profitable post-rescheduling. For example, Green Thumb Industries has paid $117.1M in income taxes over the last year. GTBIF Income Taxes (Seeking Alpha)Curaleaf has paid $113.9M. CURLF Income Taxes (Seeking Alpha)Trulieve has paid $171.3M. TCNNF Income Taxes (Seeking Alpha)The Long-Term Outlook On The Industry Although it is more likely that the industry will have to wait for the passage of some form of The Safe Banking Act, after rescheduling it is possible the major exchanges will allow companies to uplist. Once the restrictions go away, I believe it is likely that tobacco companies are going to attempt to buy themselves a business life cycle extension by acquiring cannabis companies. I'm not sure how long it will take, but once the federal government allows for the commodity to be moved across state lines, I expect for competition within the industry to elevate significantly. We have already seen a major price war break out in Canada. A similar story is likely to occur here in the United States. So while U.S.-based cannabis companies should become significantly more profitable once they are no longer forced to operate under 280e, I also expect for a price war to crush the wholesale price of cannabis if interstate commerce is allowed. If the Canadian sector is used as a guide, the price of cannabis is likely to drop over a couple of years. As the industry matures, I expect consolidation. I believe that in addition to outside players stepping in from the tobacco industry, we will witness a period of mergers and acquisitions. Some companies will pair up to realize synergies, and those which are more profitable are likely to use their free cash flow to buy themselves additional revenue. Eventually, as this consolidation plays out and these companies approach full maturity, the long-term winners will become clear as the industry enters into more of a blue chip phase. Performance MSOS began trading during the last industry-wide rally. It eventually reached a high around $55 per share in early 2021. It has since cooled off. MSOS 5-Year Chart (Seeking Alpha)Over the last 6 months, MSOS is currently up 38.93%. I believe this is because a significant number of market participants are anticipating rescheduling. MSOS 6-Month Chart (Seeking Alpha)Risks The industry is currently anticipating rescheduling. If it is halted or delayed significantly, then sentiment on the industry is likely to sour and MSOS is likely to drop in response. I believe it is unlikely to drop below its all-time lows of around $5 per share. The fund is heavily weighted into several companies so it also suffers from concentration risk. If any of its largest holdings experience significant declines, it will affect MSOS. The companies within MSOS also face competitive risk from each other. Those which adopt more competitive strategies have the potential to capture market share from others. If the Federal government ever allows the Canadian cannabis industry to export to the United States, the U.S sector will have to compete with their ultra-cheap flower and concentrate. The Canadian sector is already under significant stress from over production and would view exporting to the American market as a way to relieve this stress. Catalysts The obvious catalyst to cite here is rescheduling. The industry stands to become more profitable post-rescheduling as a result of the removal of 280e. This is likely to lead to significant market cap increases for cannabis companies. The rally that peaked in early 2021 was due to the expectation that the Biden administration was going to change the laws around how cannabis is treated. I believe it is possible that the actual change has the potential to cause an even larger rally. The passage of some form of the SAFE Banking Act will give the industry access to our banking system. As I mentioned earlier, depending on what it consists of, it has the potential to make uplisting more likely. Conclusions  Because of the impending catalyst, I currently consider this to be one of the most attractive places one can make an investment into. If rescheduling didn't appear imminent, I would still be telling everyone to avoid the U.S. sector because of how unprofitable it is due to 280e. While I didn't have any exposure to MSOS when I wrote my last article on it in November, I began purchasing LEAPS calls on it in December. Because I expect the industry to experience a strong rally after rescheduling is passed, I view the risk vs. reward here as attractive.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2437100045"}