After years of big gains, 2019 was supposed to be the year that marijuana stocks put everything together and proved to Wall Street that they deserved premium valuations. Canada has commenced recreational weed sales in Oct. 2018, derivative pot products would soon follow, and state-level legalization momentum in the U.S. looked strong.

Unfortunately, it wasn't meant to be for pot stocks. Following an impressive first-quarter run that saw more than a dozen pot stocks gallop higher by at least 70%, the declines since the end of March have been unrelenting. In fact, the only folks that seemed to do well in the marijuana industry in 2019 were those who bet against pot stocks (i.e., short sellers).

According to predictive financial analytics firm S3 Partners, short exposure to cannabis stocks rose by $843 million in 2019, a 35% year-on-year increase, with short sellers logging $993 million in year-to-date gains, through mid-December. Mind you, these gains actually topped $1.1 billion as of the end of November, but we've seen a modest bounce back in a small handful of pot stocks this month. 

Maybe what's most noteworthy about this short-selling is that the bulk of the gains -- $791 million to be exact -- have come from betting against only four pot stocks.

A man in a suit giving the thumbs-down sign.

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1. Aurora Cannabis: $265 million in year-to-date short-selling profit

Aurora Cannabis (NASDAQ:ACB) is potentially a surprising name to see at the top of the list considering that it's probably the most popular pot stock on the planet. However, it has shed 80% of its share price since mid-March, so there's been plenty of opportunity for pessimists to thrive.

Very little has ultimately gone right for Aurora in 2019. Despite being the projected leading producer of cannabis, and having a broader international presence than any other cannabis stock, none of this has really mattered due to persistent supply issues in Canada. Ontario's inability to license dispensaries has been a particularly hard-to-swallow miscue, which led Aurora to announce construction halts at its Aurora Sun facility in Alberta and Aurora Nordic 2 campus in Denmark in November. While these halts are also designed to reduce Aurora's expenditures, they'll wind up halving the company's peak run-rate output in 2020.

Aurora Cannabis has also done short-sellers plenty of favors by utilizing its common stock as capital. Having completed more than a dozen acquisitions since Aug. 2016, the company has financed practically all of them by using its common stock as collateral. As a result, Aurora's share count has skyrocketed from 16 million to around 1.1 billion in just over five years. This consistent dilution is a big reason Aurora's share price continues to decline.

It also can't be overlooked that these acquisitions have led to the recognition of $3.17 billion Canadian in goodwill on its balance sheet. This works out to 57% of the company's total assets, or 69% if you want to also factor in intangible assets. This perilously high figure implies a good likelihood of a future writedown. Suffice it to say that short sellers have read the tea leaves to a winning trade.

A jar packed with dried cannabis that's lying atop a fanned pile of twenty dollar bills.

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2. Cronos Group: $217 million

Despite sporting one of the most robust cash piles in the entire industry, it wasn't enough to keep short sellers away from Cronos Group (NASDAQ:CRON) in 2019. Pessimists have banked $217 million in year-to-date profit from Cronos, and there's still a little trading left to go this year.

As noted, Cronos Group does have a perceived-to-be lucrative partnership with tobacco giant Altria Group. In March, Altria paid $1.8 billion for a 45% stake in Cronos, giving it a means to potentially expand beyond tobacco sales in the United States. Meanwhile, the $1.8 billion Cronos received was viewed as downside buffer for the stock, as well as much needed capital to expand internationally.

Unfortunately for Cronos, it's been contending with a multitude of problems. For one, supply issues in Canada have constrained the company's ability to get its product in front of consumers. Secondly, Health Canada delayed the launch of cannabis derivatives until mid-December. The expectation going into 2019 was that high-margin alternatives would be on dispensary shelves by no later than October. Third and finally, a vape-health scare in the U.S. could threaten near-term vape sales in Canada.

What's more, it's not as if Cronos Group has exactly impressed in the production department. The company's net sales and production have significantly lagged its peers, and if a number of one-time benefits are removed from the equation, Cronos continues to lose money on an operating basis. Pessimists appear to have a firm hold of Cronos for the time being.

A visibly worried man looking at a plunging stock chart on his computer screen.

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3. Tilray: $174 million

Talk about coming full circle. After listing its stock at $17 for its July 2018 initial public offering, Tilray (NASDAQ:TLRY) would see its stock ascend to $300 on an intraday basis just two months later, in Sept. 2018. Now, in Dec. 2019, Tilray finds itself back at $17.

One the biggest issues with Tilray has been the perception that management doesn't have a concrete plan. In March, CEO Brendan Kennedy announced plans to de-emphasize investments in Canada in favor of putting that money to work in the U.S. and Europe. Even with Canada's supply issues, it was an odd decision to make considering the political uncertainty tied to the U.S. pot industry, and the equally slow uptake of weed sales in Europe, at least in the early going.

Furthermore, Tilray's decision to build up the necessary infrastructure to be successful in overseas markets has pushed any chance of profitability out until 2021 or 2022. The company's ongoing losses, coupled with its aggressive expansion, have shrunk its cash pile from $517.6 million (this includes cash, cash equivalents, and short-term investments) to begin the year to just $122.4 million by the end of September.

As the icing on the cake, Tilray's downstream merger with private equity firm Privateer Holdings hasn't reduced concerns about insiders exiting their positions. Even though this merger will lead to Privateer's 75 million shares being disposed of in an orderly manner, this is still expected to weigh on Tilray's already depressed stock.

Flowering cannabis plants growing in an indoor commercial cultivation farm.

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4. Canopy Growth: $135 million

Last, but not least, Canopy Growth (NASDAQ:CGC), the largest marijuana stock in the world by market cap, wound up generating $135 million in year-to-date gains for short sellers. Since hitting its yearly high in late April, shares of Canopy have fallen by 62%.

Pretty much everything that could go wrong has gone wrong for Canopy Growth. It's facing the same supply issues that have adversely impacted the entire industry, and hasn't been generating much revenue from its international operations. But the most damning factor of all has been Canopy's monstrous losses, which have been fueled by exorbitant share-based compensation.

Prior to being fired in early July, now-former co-CEO Bruce Linton believed that giving employees long-term-vesting stock was the smart way to improve loyalty and motivate workers. In doing so, Linton ballooned the company's share-based compensation, which is recorded as an expense on the company's income statement. In the most recent quarter, Canopy's net sales actually came in lower than its share-based compensation.

Additionally, there are more questions than can be counted on two hands when it comes to the company's future. It has CA$1.91 billion in goodwill, which looks like a writedown waiting to happen, and a new CEO it set to take over come January. Who knows what direction the company will head following the departure of its longtime leaders, Bruce Linton and Mark Zekulin. Short sellers appear to be successfully riding this uncertainty to big gains.

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.