Putting aside the fact that 2019 was not a good year for cannabis stocks, we've witnessed a lot of history being made in recent years. In 2018, Canada became the first industrialized country in the modern era to green-light recreational marijuana. This was followed in 2019 by Illinois becoming the first state to legalize adult-use consumption and sales entirely at the legislative level. And, rest assured, 2020 will be full of catalysts for the pot industry.

The question, though, is what those catalysts might be. As we look out at the remaining 10 months and change for 2020, the following four catalysts could help make or break cannabis stocks.

A large cannabis dispensary sign in front of a retail store.

Image source: Getty Images.

1. The buildout of significant retail operations in Ontario

To begin with, Ontario, Canada's most populous province, is finally beginning to address the supply bottlenecks that have plagued the region since day one of legalization (Oct. 17, 2018). Ontario, which is home to nearly 40% of Canada's residents, had been utilizing a lottery system to award retail licenses until the end of 2019. This system only allowed 24 dispensaries to open by the one-year anniversary of recreational pot sales. That's a problem when Ontario's population could probably support as many as 1,000 cannabis retail locations.

Moving forward, Ontario has chosen a more traditional application vetting process. Beginning in April, we should see at least 20 dispensary license applications approved each month, which is forecast to increase Ontario's licensed retail presence tenfold by the end of 2020. This should reduce some of the province's supply issues and help grow legal-channel pot sales.

While Ontario is a pivotal cog for all of Canada's marijuana growers, it's particularly important to those that call the province home. Ontario-based Aphria (NYSE:APHA), for example, is slated to be perhaps the second-largest producer in Canada, with 255,000 kilos in peak annual run-rate output. With Aphria finally getting the go-ahead to plant at its 1.3-million-square-foot Aphria Diamond joint venture in November (capable of 140,000 kilos annually, at its peak), the company should see easier access to retail markets in its home province by later this year.

A tag that says edibles and a cannabis leaf lying atop an assortment of cookies and brownies.

Image source: Getty Images.

2. The ongoing rollout of derivatives in Canada

Secondly, there's little doubt that the ongoing rollout of derivatives will play a big role for Canadian cannabis stocks. Derivatives consist of alternative consumption options, such as vapes, edibles, infused beverages, topicals, and concentrates.

The reason derivatives, which first began hitting dispensary shelves in mid-December, are so important to pot stocks is that they boast significantly higher margins than traditional dried cannabis flower. This means all growers will be devoting a substantial portion of their product portfolios to the development and sale of these products. Of course, derivative supply is still building up, and, as noted, retail space is slowly but steadily expanding in key provinces. Thus, investors shouldn't expect an overnight increase in operating margins for pot stocks. Rather, margins should rise incrementally as the year wears on.

An obvious beneficiary here would be New Brunswick-based OrganiGram Holdings (NASDAQ:OGI). OrganiGram spent $15 million Canadian on a fully automated assembly line capable of producing 4 million kilos of infused chocolates per year. The company also developed a proprietary powder that can be added to beverages to enhance the onset of cannabinoids, such as tetrahydrocannabinol (THC), the cannabinoid that gets users high. OrganiGram is even one of a small handful of partners chosen by PAX Labs to supply its Era vaping device. As high-margin derivative uptake expands, so should OrganiGram's margins.

A row of partitioned voting booths with attached pamphlets.

Image source: Getty Images.

3. U.S. elections

A third catalyst for cannabis stocks in 2020 are the November elections in the United States. As it pertains to pot stock investors, I'd be less concerned with who ultimately wins the presidency, and pay much more attention to the political makeup of Congress, and individual state-level voting on marijuana initiatives and amendments.

There are a number of elected seats up for grabs in Congress during the November election, and it's become pretty clear via polling that Democrats and Independents are willing to push for nationwide legalization. If the GOP loses its majority hold on the Senate, the likelihood of marijuana being legalized at the federal level grows significantly.

Likewise, there are at least three states voting on medical and/or recreational marijuana come November, and this figure should grow in the months to come.

As an example, Harvest Health & Recreation (OTC:HRVSF) is likely hoping that its home state of Arizona will vote on a recreational pot initiative come November. Harvest Health has the largest presence of any vertically integrated dispensary in Arizona. After failing to pass an adult-use pot initiative by a mere 2 percentage points in 2016, history suggests that the second time will be the charm for the Grand Canyon State. On a broader basis, with Harvest Health boasting approximately 130 total retail licenses spanning 18 states, it has a lot riding on the continued green push in the United States.

A hundred-dollar bill burning from the center outward.

Image source: Getty Images.

4. The cannabis industry shakeout

Lastly, one of the biggest catalysts in 2020 just might be the misfortune that other cannabis stocks have to contend with.

It was no secret prior to the liftoff of marijuana stocks in 2017 and 2018 that not all of them would be long-term winners. In recent months, we've witnessed financing concerns and trust issues absolutely wreak havoc on the industry. The thing is, as some marijuana stocks struggle, others that are better suited for survival will step in to gobble up market share.

For instance, Aurora Cannabis (NYSE:ACB) was widely viewed as a top-tier pot stock. It boasted the highest peak production potential in the world, and had access to more overseas countries than any other cannabis stock. But since October, Aurora Cannabis has been backpedaling at a breakneck pace. It's halted construction on two of its largest cultivation facilities and has put a third up for sale. The company is also letting go of roughly 15% of its workforce and is looking to cut its selling, general, and administrative expenses by as much as 60% in just two quarters' time. Once a presumed industry leader, Aurora Cannabis may struggle to survive over the long run.

However, Aurora's loss could mean gains for other Canadian cannabis stocks, including the likes of OrganiGram, which has supply deals in place with every Canadian province.

One thing is for certain: It's going to be an eventful year for cannabis stocks in 2020.