Marijuana stocks have undergone a striking change so far in 2019. In the first quarter, it was game on for investors, with 14 cannabis stocks gaining more than 70%, and the Horizons Marijuana Life Sciences ETF galloping forward by about 50%. The prospect of rapid sales growth and the impending launch of derivative pot products in Canada (e.g., edibles, infused beverages, vapes, topicals, and concentrates) sent anything cannabis related soaring.

But in the second quarter, pretty much 3 out of every 4 pot stocks declined, and the aforementioned cannabis ETF fell 13%. Supply issues throughout Canada continue, and the launch of derivatives has been pushed back a few months. The issues are compounded with ongoing operating losses for most marijuana stocks, and the industry has lost some of its investment buzz.

A clear jar packed with cannabis buds that's lying atop a small pile of cash bills.

Image source: Getty Images.

Here's how you fared if you bought the most popular pot stocks

But when discussing the state of the cannabis industry, what investors really want to know is how the four most popular pot stocks are performing: Aurora Cannabis (NASDAQ:ACB), Canopy Growth (NASDAQ:CGC), Cronos Group (NASDAQ:CRON), and HEXO (NASDAQ:HEXO). I say "most popular," because online investing app Robinhood shows that Aurora, Cronos, Canopy, and HEXO rank first, sixth, 11th, and 14th, respectively, in terms of shares held by its members. That puts all four of these marijuana stocks ahead of both Amazon and Disney with millennial investors (the average age of Robinhood's 6 million investors is 32). 

So, just how did the four horsemen of cannabis do in the first half of the year? To answer that, let's visualize what $1,000 invested in each company at the stroke of midnight on Jan. 1, 2019 (in other words, buying at Dec. 31, 2018, closing prices), would be worth at the end of June 2019:

  • Canopy Growth: $1,500.20
  • Aurora Cannabis: $1,576.60
  • Cronos Group: $1,538.00
  • HEXO: $1,551.00

In terms of nominal percentage gains, Canopy Growth has been the "worst" with a return of 50.02%, while Aurora Cannabis has been the best with a return of 57.66% through the first six months of the year.

Gloved hands holding a full vial and dropper of cannabidiol oil in front of a hemp plant.

Image source: Getty Images.

A convincingly good start to the year, fueled by product diversification and international expansion

Although supply issues have been persistent in Canada, all four of these cannabis stocks have made significant strides in either diversifying their product portfolios or pushing into foreign markets.

For example, the United States is viewed as the crown jewel of the cannabis movement, even with marijuana remaining wholly illegal at the federal level. While that's going to keep all four of these names from participating in even legalized states, the passing of the farm bill in December has opened the door for Canopy Growth and HEXO to enter the U.S. hemp market and develop cannabidiol (CBD) products. (CBD is the nonpsychoactive cannabinoid best known for its perceived medical benefits.)

In mid-January, Canopy Growth was awarded a hemp-processing license by New York state. Canopy plans to spend roughly $150 million constructing a processing facility that'll allow derivative production to begin sometime next year. Meanwhile, HEXO's most recent quarterly operating results signaled its intent to push into up to eight U.S. states (via its newly created HEXO USA subsidiary) with CBD products.

As for Aurora Cannabis and Cronos Group, they've been making noise with their product diversification.

The expected launch of derivatives in Canada is especially exciting for Cronos Group, which landed a 45% (non-diluted) equity stake from tobacco company Altria that closed in March. Altria is expected to work with Cronos to develop vape products, which could become the most popular alternative consumption form in Canada. Cronos also has a deal for up to $100 million with Gingko Bioworks to use its microorganism platform to produce cannabinoids at commercial scale.

Aurora Cannabis, which projects as the leading producer of marijuana in Canada, has been hard at work diversifying its production line to cater to medical marijuana patients. Although the adult-use consumer pool is much larger than the medical marijuana market, medical patients use cannabis products more frequently, and they're far more willing to buy higher-margin derivatives.

A professional stock trader talking on the phone while looking at stock charts on the monitor screens in front of him.

Image source: Getty Images.

One under-the-radar concern

Although everyone who's invested in these four popular pot stocks at the beginning of the year has made out quite well, there is one aspect of these returns that's a bit concerning. Namely, that they all delivered very similar returns, implying that the industry trades as a group rather than individually.

To be clear, it's very common for companies in established industries to move in tandem with one another. There's not always going to be a tangible news event that justifies synchronized moves by a group of stocks within a specific industry or sector.

But in the high-growth and still relatively nascent cannabis industry, it's a bit more worrisome to see popular marijuana stocks like these trade very similarly to one another. It's yet unclear which marijuana stocks will stand out as true long-term winners, and investors are looking for cannabis stocks to separate themselves from the pack. The fact that stocks like Canopy, Aurora, Cronos, and HEXO have been moving almost identically to one another suggests that even big-money investors are uncertain which pot stocks will lead this industry forward.

As I've noted before, production is one metric to consider when valuing these companies, but it's certainly not the only tool. At this point, HEXO, the smallest marijuana stock of the group by market cap, and a company expected to produce less than a quarter of what Aurora will generate in cannabis each year, looks to have the best shot of these four to hit recurring profitability first. Then again, its peak output relative to cultivation square footage gives it one of the lowest yields in the industry.

While these six-month returns have been impressive, we're a long way from settling which marijuana stocks will end up as survivors and true industry leaders. It could be all four of these popular pot stocks, or it may be none. Only time will give us that answer.

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.