In just one year, marijuana stocks went from being a cash machine for investors to a vacuum looking to suck their investment capital dry.

Following an incredible first quarter, which saw more than a dozen pot stocks gain at least 70% in value, cannabis stock investors would endure a steep nine-month downtrend the remainder of the year. Supply issues in Canada, exorbitant tax rates on weed in key U.S. markets, and a mammoth black-market presence have worked together to keep marijuana stocks from realizing their potential. As a result, cannabis stocks suffered, while short-sellers rejoiced.

However, a recent check of short interest on a number of marijuana stocks listed on the Nasdaq or New York Stock Exchange (NYSE) revealed some good news: Shares held by short-sellers declined for some of the most popular pot stocks between the end of November and the end of December. Put in another context, pessimism waned for the first time in a long time.

Here are five cannabis stocks that witnessed a notable decline in shares held short.

A close-up of a flowering cannabis plant in a commercial indoor grow farm.

Image source: Getty Images.

Aurora Cannabis

In 2019, the most popular marijuana stock in the world, Aurora Cannabis (NYSE:ACB), wound up losing more than half its value and roughly 80% of its share price since its yearly high set in March. Short-sellers absolutely cleaned up after Aurora failed to produce positive adjusted EBITDA, as the company had initially suggested it would do. It also wound up halting construction projects at a number of its largest cultivation facilities, thereby more than halving its peak production potential.

Despite this, the number of shares held short declined from 172.9 million at the end of November to 156 million by year's end. This was likely a combination of short-sellers locking in profits, as well as the realization that Aurora is still a major potential producer with a large international presence. If and when the Canadian cannabis market fixes its supply problems, the risk-versus-reward profile could very well favor Aurora.

Of course, with Aurora Cannabis contending with serious cash concerns and what I believe to be a massive writedown just waiting to happen, the 156 million shares that remain short could still be handsomely rewarded.

A cannabis bud and vial of cannabinoid-rich liquid next to a small Canadian flag.

Image source: Getty Images.

HEXO

Another cannabis stock that allowed investors to make bank in 2019 is Quebec-based HEXO (NYSE:HEXO). Last year, HEXO shed 54% of its share price, and wound up declining by more than 80% from its late-April high. Once-lofty fiscal 2020 sales projections were completely stripped away by management, with HEXO also announcing significant peak production cutbacks.

Yet, the latest short interest data also showed that pessimists have reduced their holdings in HEXO from 36 million shares at the end of November to 31.3 million shares by the end of 2019. A substantial decline in HEXO's share price, compounded with cost-cutting moves such as the layoff of 200 employees and the aforementioned production cuts, might have convinced pessimists that the company's downside was limited.

What remains to be seen is if HEXO can maintain its listing on the NYSE, which requires a $1 minimum share price. HEXO's stock has been clobbered so badly by regulatory and company-based miscues that it's been nearing this minimum share price. If HEXO winds up getting the heave-ho from the NYSE, short-sellers would likely pile back on.

A cannabis leaf laid atop a stack of one hundred dollar bills.

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OrganiGram Holdings

New Brunswick-based OrganiGram Holdings (NASDAQ:OGI) didn't have anywhere near as bad of a year as Aurora or HEXO. Nevertheless, it didn't stop yearlong short-sellers from enjoying a 31% decline in OrganiGram's share price, primarily spurred by supply issues in Ontario and a higher-than-expected fiscal fourth-quarter loss.

However, the newest data shows that short interest for OrganiGram declined from 10.2 million shares at the end of November to just 9.3 million shares by the end of December. As the only company to have generated a no-nonsense quarterly operating profit to date, it's not surprising to see pessimists approaching OrganiGram with caution.

Furthermore, the remaining short-sellers were likely burnt to a crisp last Wednesday, Jan. 15, after OrganiGram surged 45% following its fiscal first-quarter results. Although the company wound up losing a small amount of money, revenue surpassed expectations, and the company calmed investor nerves by suggesting it has enough capital to fund its existing operations and expansion activity. This isn't a pot stock short-sellers should be attacking.

A person holding a magnifying glass over a company's balance sheet.

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Aphria

Even though it didn't have a terrible year, Aphria (NYSE:APHA) remained a popular short-sale candidate in 2019. Shares of the company only lost 8% last year, although this underperformed the broad-based S&P 500 by 37 percentage points, thereby making it a win for pessimists.

But between the end of November and the end of December, shares held short in Aphria declined from 35.5 million to 30.9 million. This ebbing in pessimism may have to do with the company reporting two consecutive quarterly profits (aided by fair-value adjustments) in fiscal Q4 2019 and Q1 2020. The company's pharmaceutical distribution subsidiary, CC Pharma, acquired in January 2019, has been a boon to Aphria's top-line results, while adult-use cannabis revenue has steadily ticked higher.

Then again, the remaining short-sellers may be banking on Aphria's inability to regain investors' trust. In spite of a number of allegations from short-sellers surrounding Aphria in early 2019 that proved untrue, an independent committee did find conflicts of interest with a small number of execs regarding the company's Latin American assets purchase. This led longtime CEO Vic Neufeld to step down, and has cast a cloud over this stock ever since. Trust is a very hard thing to regain.

A judge's gavel next to a handful of dried cannabis buds.

Image source: Getty Images.

CannTrust Holdings

Lastly, there's perhaps the most logical short-sell candidate of them all, CannTrust Holdings (NYSE:CTST). When 2019 came to a close, CannTrust had shed 81% of its value, much of which was the result of a July admission that it illegally grew marijuana in five unlicensed rooms for a period of six months (October 2018 to March 2019). The company would eventually see its cultivation and sales licenses suspended in September by Health Canada.

Even with this news, CannTrust's shares held short declined from 13.1 million to 12.1 million over the final month of the year. This likely had to do with the company's share price declining below $1, thereby minimizing the potential future returns for pessimists. Remember, short-seller gains are capped at 100% if a stock goes to $0, but their potential losses are never capped.

My suspicion is that short-sellers may get one final push out of CannTrust if the company is ultimately delisted from the NYSE. Although CannTrust has regained the $1 share level, it still hasn't reported its operating results in eight months, which is a requirement for continued listing. But, like Aphria, CannTrust has a long way to go before regaining investor trust.