Canadian marijuana stocks, in general, delivered sizzling performances in the first quarter of this year. Many stocks generated greater returns in the quarter than they did in all of 2018.

Among the biggest players in the cannabis industry, there was one clear winner. Aurora Cannabis (NYSE:ACB) handily outperformed both Canopy Growth (NYSE:CGC) and Tilray (NASDAQ:TLRY). Why did Aurora's gains beat its top rivals? There were three primary reasons.

Three marijuana leaves

Image source: Getty Images.

1. Starting valuation

Probably the most important factor behind Aurora's Q1 win over Canopy and Tilray was the respective starting valuations for each stock. Canopy Growth began 2019 with a market cap of nearly $10 billion. Tilray's market cap was more than $6.5 billion. Meanwhile, Aurora Cannabis started out the year with a significantly lower market cap of $5.2 billion.

Despite its lower market cap, though, Aurora's production capacity is much greater than Tilray's. The company's funded production capacity is even larger than Canopy Growth's, ranking Aurora at the top of the industry. The bottom line is that, based on sheer bang for the buck, Aurora Cannabis was a relative bargain at the beginning of the first quarter compared to two of its key rivals. 

2. Increased optimism about partnerships

Aurora Cannabis gained nearly 83% in the first quarter versus 61% for Canopy Growth and a 7% decline for Tilray. But for much of the quarter, Canopy Growth was ahead of Aurora. What happened for Aurora to take the lead? The company announced that it was bringing a billionaire on board

In mid-March, Aurora revealed that Nelson Peltz was joining as a strategic advisor to help explore potential partnerships. Peltz, the founder and CEO of multibillion-dollar investment firm Trian Fund Management, claims extensive ties in the consumer goods industry.

Probably the biggest knock against Aurora is that it hasn't landed a major partner outside of the cannabis industry yet. Canopy Growth, of course, received a $4 billion investment from big alcoholic beverage maker Constellation Brands. Tilray hasn't had an equity investment, but it does have partnerships with Anheuser-Busch InBev, Novartis, and Authentic Brands Group. 

The news that Peltz will actively seek partners for Aurora in industries such as beverages, cosmetics, pharmaceuticals, and wellness products increased investors' optimism that the company wouldn't be left out in the cold. Aurora almost immediately jumped ahead of Canopy Growth in its year-to-date performance and hasn't looked back since then.

3. Solid fourth-quarter results

The first quarter was a big one for the Canadian cannabis industry because it's when the first reports for Canadian adult-use recreational marijuana sales came in. Canopy Growth emerged as the clear winner in Q1 with a commanding market share and huge quarter-over-quarter revenue growth. But Aurora came in a strong second place for the quarter.

Aurora Cannabis claimed a 20% market share in the Canadian adult-use marijuana market. Medical cannabis remained an important part of the company's business, though, generating 48% of overall net revenue. 

Granted, Aurora did report a big loss in the first quarter of 237.8 million in Canadian dollars (around US$178 million). However, most of that loss stemmed from one-time adjustments on the company's derivative investments, in particular from a lower fair value of its share purchase warrants for The Green Organic Dutchman.

Looking ahead

Can Aurora Cannabis continue its winning ways? There are several reasons to be optimistic.

International sales still make up only a small percentage of overall revenue for Aurora. That should change in the not-too-distant future, especially as European medical cannabis markets mature. Aurora eagerly awaits the anticipated launch of the cannabis edibles market in Canada later this year.

And there's the chance that Peltz will succeed in his efforts to find one or more partners for Aurora Cannabis. A key partnership could serve as a nice catalyst for the stock in 2019.