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Why The “BAD ETF” Might Be A Good Investment in 2022

The new “BAD ETF” was launched this past December on the New York Stock Exchange and while it may have BAD in its name, it might be a good option for investors in 2022 who might be looking for an alternative from growth & tech stocks that have historically been negatively impacted by rising interest rates.

The BAD ETF (Ticker: BAD) focuses on 3 categories for which the ticker represents – B-A-D

Betting – Casinos, gaming, and online gaming operations

Alcohol / Cannabis – Alcoholic beverage manufacturing and distribution and/or cannabis cultivation and sales

Drugs – Pharmaceutical and biotechnology product development and manufacturing

The case for these BAD Industries remains strong for a simple yet important reason that they have historically offered attractive risk-adjusted returns.  These stocks have shown resilience during economic downturns because people tend to indulge in their vices and continue to need medicine, consume alcohol & gamble regardless of economic conditions as a result we believe are typically underappreciated and therefore under-valued. In regards to the betting and cannabis aspects, as these industries become more widely accepted socially and legally, they may offer investors additional growth as more states look to legalize those industries for additional tax revenues.

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“We don’t believe social stigmas should be a primary factor when it comes to deciding what’s a good company.”

Thomas Mancuso

President & Founder of The BAD Investment Company

BAD Investments
Betting Alcohol & Drugs (Pharma) may benefit in a post-pandemic environment
Betting, Alcohol, & Drug (Pharma) Outlook

In the short term, we see clear embedded risks based on a wide range of uncertainties in the marketplace, that undoubtedly will materialize as increased volatility for the first few months of the year. Inflation and the omicron variant are clearly the two biggest factors that investors need more clarity on, yet the Omicron variant, while wildly contagious, does appear far less dangerous. We are certain that Omicron has actually acted as a distraction from the biggest rick to the economy, inflation. With Omicron peaking the week of the January 10th, and set to decline worldwide in the coming weeks, intense scrutiny will fill the airwaves from the vacuum created as Omicron fades. While inflation is an exceptional wealth creator for those who have assets, the divide between the haves and the have nots will widen more in 2022 than it has in the last 20 years.

The fed has no choice but to get aggressive on rate hikes creating a window over the next 18-24 months where more traditional asset classes (financials, durables, etc) outperform technology. In regards to BAD, the explosion in online gambling (New York live this week, Louisiana next week, Virginia, Maryland and North Carolina in short order) sets the stage for significant out-performance over the general markets. Alcohol remains steady, while Cannabis becomes a growth engine as federal laws likely provide clarification by year end freeing up banking capacity. Finally we have Pharmaceuticals who clearly have helped create their own market with the obvious influence they have held over current federal policy management. While the obvious conflicts of interest with Pharmaceuticals funding many of the regulatory entities in one way or another is bad for liberty in this country, it makes for a compelling investment thesis that should reap significant benefits for years to come.

In the more tradition gambling marketplace (i.e. Casinos) there is only upside. They are in a good position to have a strong year and are set to benefit in the reopening narrative as the Omicron variant fades. Furthermore, the expansion of legalized online gambling will create more gamblers and bring more of them to Vegas and other casino friendly states.

In addition to previous comments above, It has become clear that our economy is more dependent on the pharmaceutical industry more now than ever as new drug developments and vaccines are critical to a growing economy. We expect these developments to continue and the roadmap for biotech developments through new therapies will be applied to other diseases and cancer that impact our everyday lives.

Long-term, the thesis is simple for the markets; a more broad opening of the economy with excessive cash in the system will drive strong returns. It is hard not be optimistic given the tailwinds each of these industries and the “America Coming Back/Reopening” case is still strong as America goes back to work, and we wouldn’t bet against a working America.

Betting Alcohol & Drugs (Pharma) may benefit in a post-pandemic environment


Summarizing the BAD Industries

Betting - Reopening and Legalization of Sports Betting may benefit Casino stocks

Alcohol - Rising interest rates and more social events are positive for Alcohol stocks

Drugs (Pharma) - Pharmaceutical companies therapies are critical for economy and growth opportunity in new therapies

The Funds’ investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contain this and other important information about the investment company. Please read carefully before investing. A hard copy of the prospectuses can be requested by calling 866.251.6920. An electronic copy an be obtained by visiting badinvestmentco.com.

Important Risks Disclosures Investing involves risk.

Principal loss is possible. Alcohol, betting, pharmaceutical, and cannabis companies are subject to numerous risks. These industries face intense competition including from participants performing illegal activities or unregulated companies. Alcohol companies in particularly are subject to demographic and product trends, changing consumer preferences, nutritional and health-related concerns, competitive pricing, marketing campaigns, and environmental factors. Betting, Pharmaceutical and Cannabis companies are particularly affected by increasing regulatory constraints and the costs of complying with such constraints. The pharmaceutical companies can be significantly affected by government approval of products and services, government regulation and reimbursement rates, pricing pressure (including price discounting), limited product lines, pricing pressure (including price discounting), limited product lines, patent expirations, and intense competition. The costs associated with developing new drugs can be significant, and the results are unpredictable. Newly developed drugs may be susceptible to product obsolescence due to intense competition from new products and less costly generic products. . Pharmaceutical companies, including psychedelic treatment companies, are subject to regulation by, and the restrictions of, the Food and Drug Administration (“FDA”), the U.S. Environmental Protection Agency (“EPA”), state and local governments, and foreign regulatory authorities. Cannabis-related companies are subject to various laws and regulations that may differ at the state/local and federal level. These laws and regulations may (i) significantly affect a cannabis-related company’s ability to secure financing, (ii) impact the market for marijuana industry sales and services, and (iii) set limitations on marijuana use, production, transportation, and storage. Cannabis-related companies may also be required to secure permits and authorizations from government agencies to cultivate or research marijuana. In addition, cannabis-related companies are subject to the risks associated with the greater agricultural industry, including changes to or trends that affect commodity prices, labor costs, weather conditions, and laws and regulations related to environmental protection, health and safety. Cannabis-related companies may also be subject to risks associated with the biotechnology and pharmaceutical industries. These risks include increased government regulation, the use and enforcement of intellectual property rights and patents, technological change and obsolescence, product liability lawsuits, and the risk that research and development may not necessarily lead to commercially successful products. The BAD ETF is new with a limited operating history. The BAD ETF is the first ETF to emphasize securities whose products and services are predominantly tied to the betting, alcohol and pharmaceutical industries. The fund does this by tracking the EQM BAD Index. The Fund attempts to invest all, or substantially all, of its assets in the component securities that make up the Index. BAD is distributed by Foreside Fund Services, LLC.

Carefully consider the investment objectives, risks, charges and expenses of The BAD Investment Company ETFs before investing. This and other information about each fund is contained in the Prospectus. Please read the prospectus carefully before investing as it explains the risks associated with investing in the ETFs.

These include risks related to investments in small and mid-capitalization companies, which may be more volatile and less liquid due to limited resources or product lines and more sensitive to economic factors. Fund investments may also be concentrated in an industry or group of industries, and the value of Fund shares may rise and fall more than more diversified funds. Investments in foreign securities involve social and political instability, market illiquidity, exchange-rate fluctuation, high volatility and limited regulation risks. Emerging markets involve different and greater risks, as they are smaller, less liquid and more volatile than more developed countries. Depositary Receipts involve risks similar to those associated with investments in foreign securities, but may not provide a return that corresponds precisely with that of the underlying shares. All investing involves risk, including possible loss of principal. Please see the prospectus for specific risks related to each fund.

BAD is distributed by Foreside Fund Services, LLC.