August was a fantastic month for the broad market indexes. That wasn't the case for the cannabis sector, though. Two of the biggest cannabis-focused exchange-traded funds (ETFs) were down last month.

But there were some notable outliers. The three best-performing marijuana stocks in August delivered sizzling returns of 40% or more during the month. Here are those high-flying stocks -- and whether or not they're smart picks to buy now.

Three cannabis leaves on top of a red line trending upward

Image source: Getty Images.

1. GrowGeneration

Shares of GrowGeneration (GRWG -0.49%) skyrocketed 89% higher in August. This big move continued a hot streak for the hydroponic and organic gardening retailer. GrowGeneration was the best-performing pot stock in the first half of the year and has quadrupled in value so far in 2020.

There's a simple reason for GrowGeneration's impressive gains: Business is booming. The company reported its 10th consecutive quarter of record revenue on Aug. 13. Sales soared 123% year over year in Q2 to $43.5 million. Profits jumped to $2.6 million from $1.1 million in the prior-year period. 

GrowGeneration would almost certainly have delivered an even better performance last month were it not for a negative online report. Hindenburg Research alleged that the company's management had "extensive ties to alleged pump & dump schemes, organized crime and various acts of fraud." The short-seller also stated that GrowGeneration's shares were priced at absurdly high levels. 

2. Terrascend

Terrascend (TRSSF 7.02%) stock vaulted nearly 52% higher in August. The cannabis operator's shares have more than doubled year to date with all of those gains coming since early July.

Like GrowGeneration, Terrascend posted terrific second-quarter results. In fact, the company provided a sneak peek at its Q2 results two weeks before its official update because they were really good. Terrascend's net sales jumped 169% year over year to 47.2 million in Canadian dollars, with its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) more than doubling to CA$11.4 million. 

Investors were also excited about the potential for even better news in the second half of the year. Terrascend opened its first Apothecarium dispensary in New Jersey on July 31. It has expanded its growing capacity in Pennsylvania. The company added more retail stores in California. It also expects to begin generating significant sales from its New Jersey cultivation facility early next year. 

3. Trulieve Cannabis

Trulieve Cannabis (TCNNF 11.39%) wasn't too far behind Terrascend with an August gain of 41%. So far this year, Trulieve stock is up more than 85%.

What fueled Trulieve's strong performance last month? If you guessed a great quarterly update, pat yourself on the back. The company reported record revenue of $120.8 million in Q2, up 26% from the previous quarter. It also delivered impressive adjusted EBITDA of $60.5 million, a 23% quarter-over-quarter increase, and a profit of $6.6 million.

Trulieve remains an absolute juggernaut in Florida's medical cannabis market. The company should continue growing in Florida throughout the second half of this year. It also expects to jump into the Massachusetts market in 2021, providing another growth opportunity. 

Are they buys now?

Yes, my view is that all three of these cannabis stocks should still be good picks even after their sizzling gains in August. There's one common denominator among these stocks that makes be bullish: They all operate in the U.S. market.

U.S.-focused cannabis stocks could get a big boost from the November elections. Even if that doesn't happen, the U.S. market continues to grow, benefiting GrowGeneration, Terrascend, and Trulieve. Don't expect the stocks to deliver gains of 41% and higher every month like they did in August. However, I think their long-term prospects are bright.