Thoughts from Management

Series Two in the emerging market

It is not often that investors can take advantage of an emerging market.  That’s one of the many reasons we repurposed our American Growth Fund Series Two mutual fund (symbol AMREX); to take advantage of the exciting investment possibilities before us now in the cannabis market. Headquartered in Denver, Colorado we are literally right in the middle of the birth of this industry and have been able to view the effects first hand. In Colorado for the year 2015 the cannabis industry brought in $996 million in sales with an economic impact of $2.39 billion and created 18,005 jobs. Breaking it down between retail and medical, the overall growth from 2014 as compared to 2015 is an increase of 42.4% (Source 1).
                Looking at the bigger picture; in the United States, cannabis sales jumped 17%, to $5.4 billion, in 2015 and are expected to grow by 25% in 2016 to $6.7 billion. By 2020 legal cannabis sales in the United States are projected to hit $21.8 billion (Source 2).
                Globally, $150 billion was spent last year on marijuana. Granted most of that was done illegally (Source 2). However, it is worth noting that many countries are progressively evolving their stances on cannabis. Countries like Australia, Israel, the United Kingdom and our neighbors up north, Canada, are in various stages of legalization.
                One of the more progressive cannabis arenas is the Pharmaceutical industry, the largest sector (Drug Manufacturers) holding in Series Two’s portfolio. While cannabis medical research in the United States lags in part to the DEA’s listing of Marijuana as a class one drug, the United Kingdom's Medicines and Healthcare products Regulatory Agency (or “MHRA”), akin to the United States FDA, officially announced that Cannabidiol, also known as CBD, can be considered medicine. The MHRA review found that CBD has a “restoring, correcting or modifying” effect on “physiological functions” when administered to humans (Source 3). In Australia, researchers from the Sydney University are drawing on anecdotal, community experience with medicinal cannabis to learn more about its chemical components. They're taking tinctures and oils that are already being used by families to treat severe childhood epilepsy and analyzing what's actually in the product. At Western Sydney University, spurred by anecdotal reports that Alzheimer's patients can benefit from cannabis, they're testing CBD on mice that have been genetically modified to develop Alzheimer's Disease and have already discovered a striking effect. Perhaps the most famous medical anecdote for marijuana is its perceived ability to help with pain management and appetite stimulation. That theory will be put to the test in one of the largest clinical trials in the world at Sydney's St Vincent's Hospital and Calvary Mater Newcastle (Source 4).
                American Growth Fund Series Two, as a diversified mutual fund focused on the legal cannabis business, also has holdings in the agriculture industry, biotechnologies, farm and construction equipment, and personal services to name a few. As of 10/24/2016 its portfolio spans 14 industries made up of 22 stocks with market caps ranging from Large to Micro (18.75% Large, 9.67% Mid, 1.44% Small, and 40.54% Micro) with 29.36% in cash. The unrealized gains/losses (from purchase to 10/24/2016) have ranges from +109% to ‐15.16%.

                This November 9th, nearly 60 million Americans may wake up to find themselves in states that have abolished long standing marijuana prohibitions. An additional 24 million could wake up in states that have adopted medical marijuana laws. Arizona, California, Maine, Massachusetts and Nevada are considering legalizing recreational marijuana. Voters in Arkansas, Florida, Montana and North Dakota are asking voters whether to permit medical use for certain conditions, like cancer or chronic pain. None of those votes will change the federal ban on marijuana use, although legalization advocates say it may further pressure Congress, the DEA and the FDA to act. Polls nationally show growing support for marijuana legalization. A poll released earlier this month by the Pew Research Center found 57% of adults think marijuana use should be legal, up from 53% last year and 32% in 2006, despite the fact that marijuana remains a Schedule 1 controlled substance and is illegal at the federal level. A Gallup poll released Oct. 19 showed even stronger support: 60%, up from 58% last year and 50% in 2011(Source 5).

 

For more information on how easy it is and how little money it takes to invest in the cannabis industry and/or for a prospectus which you should read carefully before investing, please call us at 800-525-2406 from 7:30am to 4:00pm Mountain time. You may also find us at www.agfseries2.com.

1. Source: http://www.mjpolicygroup.com/pubs/MPG%20Impact%20of%20Marijuana%20on%20Colorado-Final.pdf
2. Source:
http://www.cnbc.com/2016/10/21/the-next-big-billion-dollar-cannabis-markets-investors-are-rushing-to.html
3. Source:
http://time.com/4526568/cbd-cannabis-medicine-marijuana-uk/?iid=sr-link1
4. Source:
http://www.abc.net.au/news/2016-11-01/ways-medicinal-cannabis-might-be-good-for-you/7979426
5. Source:
http://www.usatoday.com/story/news/politics/elections/2016/10/28/marijuana-ballot-measures-election-day/92420366/
Distributor: World Capital Brokerage, Inc. 1636 Logan Street, Denver, CO 80203. Member FINRA/SIPC.

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