Enthusiasm over cannabis stocks has gone through lots of ups and downs over the past few years. It's safe to say that we're currently in another upswing. Pot stocks are hot once again.

Shares of three cannabis companies, in particular, skyrocketed more than 40% last month with even greater year-to-date gains. What are these hot cannabis stocks -- and should you buy them before it's too late?

Three cannabis leaves on a red line trending upward

Image source: Getty Images.

1. MedMen

MedMen Enterprises (OTC:MMNFF) ranked as the best-performing cannabis stock in February with its shares more than tripling in value. So far this year, the retail cannabis stock is up over 250%.

This major move appears to be the result of a short squeeze that played out in a similar way as the Reddit-fueled rise of Sundial Growers (NASDAQ:SNDL). Both stocks spiked around the same time, and both experienced similar declines.

MMNFF Chart

MMNFF data by YCharts

MedMen squeaked out quarter-over-quarter revenue growth in its second quarter, which ended on Dec. 26, 2020. However, it posted another big loss of $68.9 million.  

My personal opinion is that it's too late to ride the momentum for MedMen. I also think it's too soon to view the stock as a great long-term pick. MedMen continues to lose money and isn't on a clear path to profitability at this point.

2. RIV Capital

Shares of RIV Capital (OTC:CNPO.F), formerly known as Canopy Rivers, vaulted 57% higher in February. The stock is now up more than 170% year to date.

The biggest news for RIV in February was the completion of the company's arrangement to transfer its stake in Terrascend to Canopy Growth (NASDAQ:CGC) in exchange for $115 million Canadian and shares of Canopy Growth worth around CA$170 million. This deal paves the way further for Canopy Growth, which spun off RIV Capital as a separate entity in 2019, to enter the U.S. market when federally permissible.

RIV Capital posted earnings of CA$1.4 million in its third quarter, which ended on Dec. 31, 2020. However, that profit was due to income tax recovery of CA$11.4 million. For now, RIV's financial position isn't one that makes the stock particularly attractive, in my view.

3. Aphria

Aphria (NASDAQ:APHA) stands out as another high-flying pot stock in February, with its shares jumping nearly 43%. The stock is up close to 170% so far in 2021.

The company reported solid results for its second quarter, which ended Nov. 30, 2020. Aphria's revenue soared 33% year over year. The Canadian cannabis producer also delivered its seventh consecutive quarter of increasing positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). 

However, the primary underlying factor fueling Aphria's rise is the company's pending merger with Tilray (NASDAQ:TLRY). Aphria is arguably becoming the biggest merger arbitrage play in the stock market. The combination of Aphria and Tilray will create the world's largest cannabis company based on revenue.

I'm not sold on Aphria as a top cannabis stock to buy, though. Bigger isn't always better. I'm also on the fence about the company's strategy for entering the U.S. cannabis market.

The most important point

If I had to choose one of these hot pot stocks, it would probably be Aphria. The company at least is consistently profitable. However, I don't think chasing the momentum with any of these stocks is advisable.

Marijuana decriminalization in the U.S. (which isn't the same as federal marijuana legalization but would allow states to enforce their own cannabis laws) could boost the fortunes of all three companies significantly. MedMen and RIV Capital could potentially list their shares on a major U.S. stock exchange, which could provide a nice catalyst. All three businesses would have increased growth prospects if marijuana is decriminalized in the U.S.

But I think there are other stocks that would be much bigger winners with major U.S. cannabis reform. And that brings me to the most important point of all: The hottest stocks right now won't necessarily be the hottest stocks over the long run. MedMen, RIV Capital, and Aphria are flying high. I believe that there are other cannabis stocks in a stronger position to fly even higher over the next few years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.