At this time one year ago, cannabis stocks were seated high on the mountain top overlooking nearly all other industries and sectors. The marijuana industry simply couldn't be stopped, with Canada becoming the first industrialized country in the world to legalize recreational pot on Oct. 17, 2018.

But my how the tables have turned.

A year later, a number of brand-name marijuana stocks are at or near multiyear lows, with Canadian pot stocks leading the charge lower. A plethora of challenges, including a backlog of cultivation and sales licenses with regulatory agency Health Canada and a very slow rollout of licensed dispensary at the provincial level in places like Ontario and Quebec, have led to significant legal supply shortages in our neighbor to the north. While fixable, these supply constraints are liable to persist for many quarters to come.

Though this is bad news for all Canadian-based growers, there are three major cultivators that may see a bit of a reprieve. That's because the following three marijuana stocks have significant grow operations located in Europe, and at the moment, Europe isn't contending with supply concerns. In effect, the following pot stocks may be able to partially or significantly hedge Canadian supply weakness by leaning on Europe.

A person holding cannabis leaves in front of a globe of the Earth.

Image source: Getty Images.

Aurora Cannabis

Perhaps it's no surprise that the world's leading marijuana producer by peak annual output, Aurora Cannabis (NYSE:ACB), happens to have a pretty sizable presence in Europe. Aurora has an export, research, cultivation, and/or partnership presence in 25 countries worldwide, including Canada, 14 of which are in Europe.

Out of Aurora's 15 processing facilities that may one day produce as much as 700,000 kilos per year in total, three are located in Europe. First, there's Aurora Portugal, which will span 38,000 square feet and yield about 4,000 kilos annually. Phase 1 of development should be complete by the third quarter of 2020.

The two larger developments are Aurora Nordic 1 and 2 in Denmark. These are both joint ventures with tomato producer Alfred Pedersen & Son that'll see existing greenhouses retrofit for cannabis production. Aurora Nordic 1 is already licensed for cultivation, with the 100,000 square-foot facility capable of producing 8,000 kilos per year. But Aurora Nordic 2, which is awaiting licensing, will span 1 million square feet and yield at least 120,000 kilos annually at peak capacity. All told, this gives Aurora Cannabis 132,000 kilos of minimum peak output in Europe and should allow for easy access throughout the region. 

But understand that we're talking about close to 20% of Aurora's production here. This means that around 80% of its output could still be adversely impacted by Canada's supply struggles. Thus, investor expectations for Aurora Cannabis over the near term should remain tempered.

A gloved processor using scissors to trim a cannabis flower.

Image source: Getty Images.

Flowr Corp.

On the other hand, a cannabis stock that might really be able to brush much of Canada's early stage supply issues to the wayside is small-cap Flowr Corp. (OTC:FLWPF).

Flowr has approached growing marijuana, at least domestically, from a different standpoint than many of its peers. Rather than aiming for quantity, Flowr has worked with Scotts Miracle-Gro's subsidiary Hawthorne Gardening on efficiency and top-notch quality at its flagship Kelowna campus in British Columbia. The result is 300 grams of yield per square foot in 2019 -- which is higher than any other publicly traded grower that I track -- and a crop of premium and ultra-premium weed. Since so few growers have chosen to focus on the ultra-premium pot market, Flowr will likely have little pricing issues domestically, assuming it can navigate the supply challenges of bringing its product to market.

But what makes Flowr truly exciting is its recent acquisition of privately held grower Holigen. This purchase brought Holigen's Aljustrel outdoor grow farm into Flowr's portfolio. Located in Portugal, this grow farm spans 7 million square feet and should be able to produce 500,000 kilos of cannabis per year, when fully operational. Even though we aren't talking about the same high-quality and efficiency yield as what Flowr is producing in Kelowna, this 500,000 kilos offers easy access to Europe's burgeoning medical marijuana market. Plus, this output could easily be processed into higher margin derivatives, depending on consumer demand.

Flowr may be tiny, but it's in an enviable position among marijuana growers.

A dried cannabis bud lying atop a doctor's prescription pad.

Image source: Getty Images.

Tilray

Even though it's been among the worst performers in 2019 following its moonshot to $300 a share last September, British Columbia-based Tilray (NASDAQ:TLRY) may be able to hedge its bets, thanks to its European assets.

Similar to its peers mentioned here, Tilray's European connection hinges on its operations in Portugal. The company began harvesting at the 2.5 million-square-foot facility back in March, with the facility officially opening in April. Keep in mind, though, that this 2.5 million square feet isn't just for cultivation. Most of this square footage houses processing and manufacturing space that'll allow Tilray to be a seed-to-sale player in Europe's potentially lucrative medical marijuana market.

Tilray currently has pharmaceutical distribution agreements in place with five European countries, and the expectation is that this will expand as more EU countries lay out and pass medical marijuana legislation. 

Unfortunately for Tilray, this European exposure doesn't overshadow its shortcomings in the domestic Canadian market. Having been somewhat late to the game to expand capacity at home, Tilray has been reliant on wholesale cannabis purchases to meet its own supply agreements and product needs. Buying wholesale weed is typically a margin killer, and it's played a big role in the 20% to 27% gross margin that the company has delivered in each of the past three quarters.

Though Tilray's European presence should be a clear positive for the company, we're talking about it being more of a hedge than a savior at the moment.