Arguably the most anticipated day of 2021 occurred last week -- and if you weren't paying close attention, you might have missed it.

Tuesday, Feb. 16, marked the deadline for money managers with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission (SEC). A 13F provides a snapshot of what securities institutional investment funds and hedge funds were holding at the end of the most recent quarter. In this instance, we're talking about an under-the-hood look at what the brightest minds on Wall Street were up to during the fourth quarter.

If there was one takeaway from the mountain of 13Fs filed with the SEC for Q4, it was that marijuana stocks got a lot of love. ownership by 13F filers in the following five pot stocks increased by 28% to as much as 61% from the sequential third quarter.

A tipped over jar packed with cannabis buds that's lying atop a small pile of cash.

Image source: Getty Images.

Aphria & Tilray: Aggregate share ownership by 13F filers up 61% and 51%, respectively

I'm discussing Aphria (APHA) and Tilray (TLRY) together because of their pending merger. Since the announcement came during Q4, it almost certainly influenced money managers' decision to buy into both companies hand over fist.

The reverse merger, which will keep the Tilray name despite Aphria's shareholders owning a larger percentage of the combined company, will create the largest cannabis company by annual sales, broaden the duo's product offerings, and cement the combination as a force in European markets. Additionally, the scale offered by Aphria and Tilray should result in cost synergies and low production costs. Money managers appear to be viewing this combination favorably, which is why ownership rocketed higher in both names in Q4. 

However, Tilray has been anything but successful since its share price moonshot to $300 in September 2018. Management has struggled to expand beyond Canada, and the company has been burning through cash at a worrisome rate. In other words, Tilray needed this deal far more than Aphria did. Fixing Tilray's deficiencies won't be easy, which should give investors reason to pause following the recent run-up in both companies.

Potted cannabis plants growing under special lighting in an indoor greenhouse.

Image source: Getty Images.

OrganiGram Holdings: Up 36%

Money managers also piled into New Brunswick-based OrganiGram Holdings (OGI 2.02%). The 34.1 million aggregate shares figure owned by 13F filers is over 9 million (36%) more than they held in the sequential third quarter.

The likeliest reason behind this shift in sentiment is the changing of the guard in Washington. Joe Biden winning the presidency in November opened the door to a new era of hope for cannabis reform on Capitol Hill. Democrats winning back the Senate by the slimmest majority possible in early January was simply the icing on the cake. Legalizing marijuana at the federal level in the U.S. would allow OrganiGram and its peers to enter the far more lucrative U.S. weed market.

Successful money managers might also be drawn to OrganiGram's inherent competitive advantages. For example, it only has a single operating facility, which means it's relatively easy to adjust its output and expenses. The company also incorporates three tiers of growing in its licensed indoor rooms, which helps to maximize yield. When coupled with the company's abundant investments in high-margin derivative production (e.g., chocolate edibles and beverage powder), it's easy to understand why Wall Street's so excited.

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

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Aurora Cannabis: Up 28%

Arguably the most head-scratching move of the quarter was the 28% increase in shares owned by 13F filers in Canadian licensed producer Aurora Cannabis (ACB 0.62%). It's worth noting that hedge funds actually decreased their stakes in Aurora by 11% in Q4.

Politics and short interest are the two best guesses I can offer as to why institutional money managers fancied Aurora Cannabis. The U.S. is more likely than ever before to enact serious federal cannabis reform. That probably has money managers thinking about Aurora's entrance into the U.S.

Aurora also has one of the highest levels of short interest among pot stocks. This suggests it could be susceptible to a short squeeze, which has, in the past, quickly driven up its share price.

Unfortunately, Aurora Cannabis isn't a very good company. Since June 2014, management has drowned shareholders in dilution. The company's total share count has risen from 1.35 million to north of 186 million.

Management has also moved the profitability goalposts on numerous occasions. Those shifts are concerning since the company's debt covenants are tied to reaching positive earnings before interest, taxes, depreciation, and amortization (EBITDA). Investors shouldn't follow the big money into Aurora Cannabis.

A cannabis leaf laid in the outline of the Canadian maple leaf, with joints and a cannabis bud next to the flag.

Image source: Getty Images.

HEXO: Up 28%

Another pot stock scooped up by money managers that might raise an eyebrow or two is Canadian licensed producer HEXO (HEXO).

Aside from possible cannabis reform in the U.S., HEXO's biggest catalyst came in December, when it released its fiscal first-quarter operating results. The $41.3 million Canadian gross sales figure in Q1 2021 represents an all-time high for HEXO, with its negative EBITDA of CA$0.42 million marking the sixth consecutive quarter of improvement. In other words, HEXO's operating performance wasn't nearly as poor as expected in the latest quarter. This suggests supply issues are abating in Canada, and HEXO's cost-cutting initiatives are working. 

Then again, HEXO has been nearly as big of a disaster as Aurora. It's issued a lot of shares and debt to raise capital, and it's been busy slashing costs to achieve profitability. Yet even with its adjusted EBITDA improvement, the company's operating loss, sans fair-value adjustments, was still close to CA$9 million in Q1 2021.

Add on the new uncertainty of acquiring Zenabis Global (HEXO's previous acquisition of Newstrike Brands ended poorly ), and I see no reason for investors to buy into the HEXO hype.