The year 2018 will certainly go down as the biggest in history for the marijuana industry. In October, Canada became the first industrialized country to legalize recreational cannabis. The following month, a handful of U.S. states legalized medical or adult-use weed. Then, in December, a farm bill was signed into law that legalizes hemp and hemp-based cannabidiol in the United States.

Then again, it was a pretty bad year overall for marijuana stock investors. The most-followed cannabis exchange-traded fund was hammered, with more than 40% of all marijuana stocks with a market value in excess of $200 million losing at least 30% in 2018. Mind you, this only includes pot stocks that were publicly listed as of Jan. 1, 2018, thereby excluding some highfliers, such as Tilray, that went public last year.

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

Image source: Getty Images.

These were the best-performing pot stocks in 2018

Of course, there were some marijuana stocks that bucked 2018's underperformance. In total, four marijuana stocks more than doubled. Perhaps most interesting, none of these marijuana stocks were on anyone's radar when the year began.

CV Sciences: Up 598%

Taking the crown as the marijuana stock of the year is small-cap CV Sciences (NASDAQOTH:CVSI), which came really close to gaining 600%.

CV Sciences aims to develop novel therapeutics based on cannabidiol (CBD), the nonpsychoactive cannabinoid known for its perceived medical benefits. The company also retails hemp-based CBD products. The recent passage of the farm bill allowing hemp-based CBD to become legal should give CV Sciences and its products a much broader reach than in previous years.

Through the first nine months of 2018, the company recorded $34 million in sales, a 153% year-over-year increase, with $7.1 million in net income. With profitability somewhat rare among pot stocks, CV Sciences has ridden the CBD wave to success. 

On the other hand, investors would be wise to tread cautiously around this stock. Even though its retail business is doing fine, the company's cannabinoid-based drug development segment, which is working on a CBD-nicotine combo therapy as a smokeless tobacco-cessation solution, has faced attacks from noted short-seller Citron Research. Citron claims that CV Sciences' CBD-nicotine therapy was rejected by the U.S. Patent and Trademark Office, yet that rejection was allegedly never disclosed to shareholders. The short-term losses in CV Sciences' stock following Citron's report have led to a slew of class action lawsuits on behalf of shareholders.

In other words, sustaining 2018's gains could prove difficult.

An indoor commercial cannabis-growing greenhouse.

Image source: Getty Images.

MariMed: Up 371%

Even though cannabis consulting and grow-facility operator MariMed (NASDAQOTH:MRMD) wasn't the top-performing pot stock in 2018, its shareholders aren't going to complain about a 371% gain.

MariMed predominantly made waves in 2018 with acquisitions and investments. In October, it closed on its acquisition of BSC Group in New Jersey. This could be a very smart purchase, with New Jersey looking like it is on the verge of legalizing recreational weed. BSC Group should be an immediate beneficiary of licensing and consulting within the cannabis industry if the New Jersey Legislature follows through and legalizes adult-use pot.

MariMed also made an investment in Sprout, a company that makes software for customer relationship management (CRM) and marketing. Considering that the marijuana industry has been dominated by cash, CRM software could prove pivotal to helping cannabis retailers better understand their customer base in the years to come.

But as with CV Sciences, momentum could be tough to hang on to in 2019. Despite 88% sales growth to $8.4 million through the first nine months of 2018, non-cash amortization pushed MariMed to an unsightly $18.2 million loss through Q3 2018. Now that operating results actually matter, MariMed will have to do better to impress Wall Street. 

A cannabis leaf floating on the carbonated head of a beverage, with cannabis leaves to the right of the glass.

Image source: Getty Images.

New Age Beverages: Up 137%

Another under-the-radar pot stock that kicked tail and took names in 2018 is New Age Beverages (NASDAQ:NBEV). This definitely wasn't on marijuana stock investors' radars at the beginning of last year, because New Age didn't even announce its entrance into the cannabis industry until September.

Best known for its line of ready-to-drink coffees and teas, as well as kombucha, energy drinks, and relaxation beverages, New Age announced in mid-September that it would introduce a new line of CBD-based beverages at an October convenience-store trade show in Las Vegas. The company wound up unveiling a CBD-infused sparkling water, a CBD-infused shot, and a CBD-infused tea. With the Brightfield Group forecasting that CBD sales will explode from $591 million in 2018 to $22 billion by 2022, and two brand-name companies making infused-beverage deals with cannabis growers in August, investors piled into New Age Beverages on this announcement.

Furthermore, five weeks ago, New Age announced its intent to acquire Morinda Holdings, which has about $240 million in annual sales and a distribution network that can reach 60 countries. This should allow New Age to utilize Morinda's distribution network to reach foreign countries with its CBD-based beverages.

However (and I really don't mean to sound like a broken record), holding its 2018 gains won't be easy. The introduction of CBD-based products should help sales in 2019, but the company's core products have pretty much fizzled out from a growth perspective. Similarly, New Age doesn't look as if it'll turn a profit this year. With CBD-infused beverages liable to be a competitive space, New Age could ultimately struggle. 

A cannabis processor holding a freshly trimmed bud in their gloved left hand.

Image source: Getty Images.

iAnthus Capital Holdings: Up 105%

Vertically integrated grow-farm and dispensary operator iAnthus Capital Holdings (NASDAQOTH:ITHUF) saw its share price more than double in 2018.

Perhaps the biggest news for iAnthus last year was the October-announced $640 million deal to acquire MPX Bioceutical (NASDAQOTH:MPXEF). It remains the largest public-company-to-public-company acquisition in U.S. cannabis history, with MedMen Enterprises' $682 million acquisition of privately held PharmaCann being the largest U.S. deal overall.

When complete, the combination of iAnthus and MPX Bioceutical will have 56 retail stores and 14 cultivation and processing facilities across 10 states, with MPX bringing 10 dispensaries and six cultivation/processing facilities to the table. Among the 10 addressable states are California, which should become a larger market by annual sales than all of Canada; Florida, which is well on its way to $1 billion in annual sales; and New York, which appears likely to approve recreational pot in 2019.

As a refresher, no interstate transport of cannabis is allowed in the U.S., per federal law. This is why vertical integration is so important, and why the MPX Bioceutical deal makes sense. 

The big question in 2019 is whether iAnithus can generate an operating profit. Unfortunately, with the vertically integrated dispensary model being very cost-heavy in the near term as companies seek to grab land and open stores, it's looking unlikely. 

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