At this time last year, marijuana stocks were the hottest thing since sliced bread. At the end of the first quarter of 2019, more than a dozen cannabis stocks wound up rising by at least 70% in a three-month stretch, fueled by Canada's imminent release of derivative products and an expected rapid ramp-up in weed sales. Unfortunately, none of these expectations became reality.

Instead of delivering exponential growth, Canadian pot growers have seen their sales growth slow to a crawl, with regulatory concerns taking most of the blame. Health Canada wound up delaying the release of high-margin derivatives, such as edibles, vapes, and infused beverages, until mid-December, while Ontario, Canada's most-populous province, had been working with a lottery system to assign dispensary licenses until the end of 2019. The result was that only 24 retail stores were open as of Oct. 17, 2019, the one-year anniversary of recreational weed sales commencing.

This amount of bad news can only add up for so long before individual pot stocks feel the pain -- and in recent months, they've certainly been pummeled.

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

Image source: Getty Images.

Canadian cannabis growers have been nothing short of a disaster

For instance, the most popular pot stock in the world, Aurora Cannabis (ACB 0.07%), announced in November that it was halting construction on two of its largest projects (Aurora Sun in Alberta and Aurora Nordic 2 in Denmark) to conserve capital. A few months later, Aurora put the 1 million-square-foot Exeter greenhouse up for sale, which has yet to be retrofit for marijuana production. All told, this took more than 400,000 in peak annual output off the table. As the icing on the cake, Aurora Cannabis laid off 500 workers in an effort to conserve capital and move toward positive adjusted EBITDA, which is a new requirement of its debt covenant.

Canopy Growth (CGC -6.27%), the largest marijuana stock in the world by market cap, became the latest casualty. Last week, Canopy announced that it would close its Aldergrove and Delta cultivation farms in British Columbia, and would not open its 350,000-square-foot Niagara on the Lake, ON, campus later this year as it had originally planned. This removes up to 45% of Canopy Growth's licensed production capacity. Similar to Aurora, Canopy is also letting 500 of its employees go.

Cannabis bottle-rocket Tilray (TLRY), which soared to a valuation of $26 billion two months after its initial public offering in July 2018, is also feeling the pain, with its market cap now barely clinging to $1 billion. Tilray's fourth-quarter report featured a laundry list of impairment charges (to be fair, Canopy and Aurora have also registered huge impairment charges), including a $68 million inventory writedown. Inclusive of all costs, Tilray lost more than $301 million in 2019 on an operating basis. 

No matter where investors look (HEXO, CannTrust, and so on), Canadian growers are an absolute dumpster fire.

Well, all of them except for one.

Flowering cannabis plants growing in an indoor commercial farm.

Image source: Getty Images.

This looks to be the only true winner in the Canadian marijuana space

With the understanding that there's still a lot to be decided in the Canadian pot-growing space, the only grower that's showing any traits that resemble a long-term winner is New Brunswick-based OrganiGram Holdings (OGI -1.49%).

OrganiGram is the only major grower (i.e., a producer capable of at least 100,000 kilos of annual output if fully building out their cultivation assets) that's located in an eastern Atlantic province, and that has just a single campus. Being located in eastern Canada is advantageous because cannabis-use rates among adults are significantly higher in these provinces, relative to Canada's national average. Even though eastern Atlantic provinces aren't nearly as populated as say Ontario, Quebec, and British Columbia, it gives OrganiGram a nice base of consumers in its own backyard. But don't worry, it's also one of five Canadian growers with licenses to sell pot in all 10 provinces.

Meanwhile, operating only one campus affords OrganiGram the luxury of easily being able to reduce supply chain costs and output to match the prevailing market conditions. That's not easy to do for growers like Aurora Cannabis and Canopy Growth, which count 15 and 11 separate cultivation facilities. Having one campus where growing, processing, and innovation are ongoing makes for a very efficient company.

Speaking of efficiency, another thing that makes the Moncton, NB, campus special is that OrganiGram is utilizing a three-tiered growing system. This is to say that not only is OrganiGram growing cannabis horizontally in its licensed production space, but it's also making use of its vertical space within its greenhouses. In less than 500,000 square feet of cultivation space, OrganiGram could, in theory, produce as much as 113,000 kilos per year. At its peak, OrganiGram may be capable of 230 grams of yield per square foot, which is likely two to three times higher than its competitors.

An edibles tag an cannabis leaf lying atop an assortment of cookies and brownies.

Image source: Getty Images.

OrganiGram also made prudent investments in high-margin derivatives. A $15 million Canadian investment in a fully automated line of equipment will allow the company to produce 4 million kilos of infused chocolates per year. It'll also be introducing a powder in the first-half of 2020 that can be added to beverages of consumers' choice to speed up the process by which cannabinoids take effect. OrganiGram is one of four growers chosen to be a supplier for PAX Labs' Era vape device, as well.

To continue adding to the list of positives, OrganiGram wasn't lured in by the willy nilly expansion that's plagued the likes of Aurora Cannabis, Canopy Growth, and Tilray. As such, its balance sheet isn't weighed down by goodwill and other impairment charges. Although OrganiGram has turned to share offerings to raise capital from time to time, it looks to have sufficient capital to execute on its long-term strategy and won't be destroying shareholder value via writedowns.

As one last bit of evidence that OrganiGram is going to be the one true winner among Canadian pot growers, it's the only one that's produced a no-nonsense quarterly profit to date. During its fiscal third quarter, OrganiGram's sales, minus its cost of goods sold and operating expenses, yielded an operating profit of almost CA$1.2 million. Sure, we've witnessed some Canadian pot stocks generate a "profit," but not without the help of fair-value adjustments, asset sales, or derivative liability revaluations. OrganiGram is the only company that's generated a real operating profit, thus far.

If you're looking for the clearest long-term winner in the Canadian marijuana space, it's OrganiGram Holdings.