The stock market is off to its best start to a new year since 1991, with the broad-based S&P 500 advancing 13% in the first quarter. But these gains can't hold a candle to the blazing-hot marijuana industry, where the first-ever cannabis exchange-traded fund galloped 54% higher. The expectation of rapid sales growth has proven to be more than enough to continue pushing pot stock valuations into the stratosphere.

Of the 50 marijuana stocks that I personally tracked in the first quarter, 40 finished higher, with many ending the month up by a double-digit percentage. In fact, 14 pot stocks managed to gain at least 73% through the end of March.

Conversely, though, 10 marijuana stocks underperformed and finished the quarter lower. In particular, there were five standouts among these decliners that lost at least 15%, and can now rightly be called the worst of the worst among pot stocks. Here they are, in descending order.

An up-close view of a flowering cannabis plant.

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22nd Century Group: Down 31%

Topping the list as the worst marijuana stock of the first quarter is 22nd Century Group (NYSEMKT:XXII), a company whose plant biotechnology could be used to control the content of tetrahydrocannabinol (THC) or cannabidiol (CBD) in cannabis or hemp crops. THC is the psychoactive cannabinoid that gets a user high, while CBD is the nonpsychoactive cannabinoid known for its perceived medical benefits.

Everything was more or less going OK for 22nd Century Group until early March, which is when U.S. Food and Drug Administration (FDA) head Scott Gottlieb announced that he'd be stepping down in April. Unlike his predecessors, Gottlieb was much tougher on big tobacco and helped to outline the FDA's push toward cigarettes that contain nonaddictive levels of nicotine. With Gottlieb resigning, this pushback against big tobacco may slow or cease altogether.

This is meaningful because 22nd Century Group is working on a Very-Low Nicotine Content (VLNC) cigarette that reduces nicotine in the bloodstream of users by 97%. With Gottlieb leaving, the market for VLNC products may be reduced significantly -- not to mention that users smoke in order to get a nicotine buzz, so removing nicotine content from tobacco cigarettes may not have resulted in strong sales in the first place.

A magnifying glass being held over a company's balance sheet.

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TILT Holdings: Down 23%

Although it's not a company most marijuana investors have probably heard of before, Canadian-based TILT Holdings (OTC:TLLT.F), which went public just four months ago, shed 23% of its value in the first quarter.

TILT is a vertically integrated cannabis company focused on the U.S. market. Its assets help to manufacture, distribute, and sell cannabis, as well as provide business-to-business services in the weed space, including software solutions and value-added services. Even though it's generating a good amount of revenue in the early going, with pro forma sales in 2018 totaling just over $97 million, Wall Street looks to be worried about the company's acquisition-heavy strategy. 

In January, TILT Holdings completed its purchase of Standard Farms for $40 million, closed on its buyout of Blackbird for $50 million, and closed on its acquisition of Jupiter Research for $210 million. The cash component to these deals was $12 million, $5 million, and $70 million, respectively, with the remainder composed of common stock or convertibles to common stock. In other words, TILT is growing its business and diversifying its operations very quickly, but it's diluting its existing shareholders pretty significantly. In fact, the aggregate value of these deals ($300 million) is about $85 million higher than TILT's current market cap -- and that's no bueno! 

Four vials of cannabidiol oil lined up on a counter.

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Medical Marijuana, Inc.: Down 18%

Another pot stock that found itself down and out in an otherwise stellar quarter for the cannabis industry is Medical Marijuana, Inc. (OTC:MJNA), the first publicly traded pot stock. Though it trades for mere pennies, this $222 million company wound up losing 18% of its value in the first quarter.

On one hand, you'd think that Medical Marijuana, Inc. would be thriving with the passage of the Farm Bill in December 2018 and the legalization of medical marijuana in Mexico in June 2017. This is a company that relies on hemp-based products and has established the ability to export its hemp-based products to Mexico.

And yet, this is also the company's problem. The passage of the Farm Bill allowed considerably larger companies with deeper pockets to move into the hemp production and processing space in the United States. That could make Medical Marijuana, Inc.'s task of growing sales and grabbing market share much tougher moving forward.

Additionally, the company's sizable investment in Axim Biotechnologies has come back to earth over the past two years. Having once hit more than $20 per share, Axim regularly traded between $1 and $2 per share during the first quarter. In other words, Medical Marijuana's paper gains in Axim have mostly evaporated.

Scissors cutting a hundred-dollar bill in half.

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FSD Pharma: Down 17%

Small-cap cannabis cultivator FSD Pharma (OTC:FSDDF) is yet another marijuana stock that went against the grain in the first quarter. While most pot stocks moved higher by double digits, it shed 17% of its value.

Like 22nd Century Group, it was a relatively calm quarter, save for one news event. On Feb. 7, a joint venture between Auxly Cannabis Group (OTC:CBWTF) and FSD Pharma broke down, with both parties going their separate ways. But it was FSD Pharma that took it the hardest.

The original deal, which was signed in March 2018, was for FV Pharma, a subsidiary of FSD Pharma, to use up-front capital from Auxly Cannabis (which controlled a 49.9% stake in the joint venture) to construct a 220,000-square-foot cultivation facility. However, in mid-January, Auxly provided notice to FSD Pharma of construction deficiencies and contractual breaches associated with the joint-venture facility. Rather than choosing to address these issues, FSD Pharma notified Auxly on Feb. 7 that it was terminating their joint venture.

You see, Auxly has more than a dozen licensed production partners and wholly owned grow sites. FSD Pharma, though, doesn't have the luxury of production diversity, and it may now need to find funding to build out its capacity with Auxly in the rearview mirror.

A visibly frustrated businessman in a suit grasping his head as he looks at two computer screens full of stock charts.

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Namaste Technologies: Down 15%

Finally, but not surprisingly considering that it's topped the list of the worst-performing pot stocks two months in a row, we have Namaste Technologies (OTC:NXTTF). Namaste, which sells vaporizers and operates an online cannabis portal known as NamasteMD, declined by 15% in the first quarter.

Namaste has really taken its lumps since October, which is when noted short-seller Citron Research alleged fraud at the company. Even though an independent review was conducted and a number of Citron's allegations proved to be without merit, one accusation proved true. This being that then-CEO Sean Dollinger had sold company assets to another vested party without disclosing so in regulatory filings. So, Dollinger was terminated with cause and the company announced its intent to conduct a strategic review of its options, which may include a sale.

Under normal circumstances, putting a company up for sale would be expected to fetch a premium -- especially a company with a growing online cannabis portal and access to vaporizers, which should see higher sales once alternative consumption options become legal in Canada by this coming fall. But Namaste's corporate gaffe has caused investors to lose faith in management, and there's simply no easy fix for that.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.