This has been nothing short of a transformative year for the North American cannabis industry. In midterm elections this past week, two additional states -- Utah and Missouri -- joined the ranks of having legalized medical marijuana. The U.S. is now just one state away from having two-thirds of the nation legalized in some capacity.

Meanwhile, Canada made some history of its own on Oct. 17 by becoming the first industrialized country in the world -- and only the second country overall -- to have legalized recreational marijuana. Although it's been a bit of a bumpy beginning, with demand handily outpacing supply, the industry is fully expected to generate $5 billion (or more) in added annual sales within a few years.

A cannabis leaf lying atop a neat stack of hundred dollar bills with a dark background.

Image source: Getty Images.

There's been a reshuffling among the largest marijuana stocks

But as you might imagine, this isn't a static industry. We're constantly witnessing marijuana stocks shuffle their strategies. For instance, the first half of the year was all about capacity expansion and growing as much cannabis at peak production as possible. Now that strategy has shifted. Pot stocks are focused on product diversification, marketing and branding efforts, and even consolidation to some extent.

All of this shuffling has created wild vacillations in shareholders' expectations of pot stocks and, therefore, the share price of marijuana stocks.

But something interesting happened at the beginning of November. After essentially reigning as the largest marijuana stock by market cap for a month and a half, Tilray (NASDAQ:TLRY) gave up its seat at the head of the table. Mind you, Tilray roared from just $25 a share in mid-August to touch $300 a share on an intraday basis just four weeks later. Peaking at a market cap of $28 billion, Tilray has since consistently maintained a valuation of $10 billion or higher. In fact, this past Wednesday it surged almost $33 a share to a valuation of $13 billion when now-former Attorney General and staunch cannabis opponent Jeff Sessions announced his resignation, pursuant to President Trump's request.

Dried cannabis buds next to a piece of paper that says yes, lying atop dozens of miniature Canadian flags.

Image source: Getty Images.

Canopy Growth is No. 1 in market cap, once again

Reclaiming its rightful spot atop the marijuana field is once again Canopy Growth Corp. (NYSE:CGC). Yet, what might surprise folks is that a rise in Canopy's share price didn't exactly help it reclaim its crown. Rather, Modelo and Corona beer maker Constellation Brands (NYSE:STZ) closed its roughly $4 billion equity investment in Canopy, and that's what lifted the company's market cap to a new high of almost $15 billion.

For those who may not recall, Constellation announced its investment in Canopy Growth in mid-August. Constellation agreed to acquire 104.5 million shares of Canopy's stock for what was at the time a 51% premium to its closing price on Aug. 14. Constellation Brands also received more than 137 million warrants, which, if exercised in the future, could boost its ownership stake in Canopy from a current 37% to north of 50%. The point being, the addition of 104.5 million shares outstanding, while lining Canopy's coffers with a boatload of cash, effectively made it the largest marijuana stock once again. 

The question is: Can Canopy Growth retain its leading market cap? To that end, I'm not certain.

A vial of cannabis oil next to a cannabis leaf on a table.

Image source: Getty Images.

Here's what Canopy needs to do to maintain its top market cap

If it's to keep its crown as the market's biggest pot stock, Canopy Growth is first going to have to demonstrate that it can put its war chest of cash to good use. The company has been itching to expand into new markets, as well as make acquisitions to complement its existing strategy. Recently, it closed on the $205 million deal to buy Hiku Brands, adding retail access in Manitoba, along with a handful of well-known cannabis brands to its portfolio. Wall Street and investors will be looking for more acquisitions and a push into new markets as evidence that this capital is being put to work. 

Investors are also going to want to see Canopy Growth work to diversify its product line. Although dried cannabis is likely to have robust margins and demand in the early going, it's had a tendency to be commoditized in what few U.S. states have legalized recreational weed. Canopy's push into oils and other alternative forms of consumption (once legalized) are going to be monitored very closely, as these higher margin products will be crucial to the company generating a recurring profit in the quarters to come.

Lastly, it's going to come down to tangible results. With marijuana now legalized, investors are beyond the promises stage and looking for genuine sales growth and either narrowing losses or profits. With Canopy Growth spending heavily on capacity expansion, it's unlikely to be profitable in fiscal 2019. It does, however, have an opportunity to generate profits beginning in fiscal 2020.

The eyes of the cannabis investment community are once again back on Canopy Growth -- let's see how it performs.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.