You may not have realized it, but one of the most important days of the quarter came and went last week. On May 17, institutional investors and hedge funds with more than $100 million in assets under management were required to file Form 13F with the Securities and Exchange Commission. In doing so, they effectively lifted the hood on their buying and selling activity during the first quarter.

Even though 13Fs have their flaws -- the snapshots they provide are at least 45 days old -- they can provide valuable information, such as the trends catching the attention of some of the brightest and most-successful money managers. One trend that certainly stood out in Q1 was that money managers weren't too excited about growth stocks. Finding stocks with double-digit sequential share ownership growth by 13F filers was incredibly difficult, compared to previous quarters.

And yet, the following three extremely surprising stocks were bought hand over fist by money managers in Q1.

The words, Wall Street, engraved into the side of a business in Manhattan.

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Despite money managers plainly avoiding high-flying growth stocks in the first quarter and being more mindful of value, they absolutely piled into cloud data warehousing company Snowflake (SNOW -0.07%), which is by far the most expensive of all the big-name cloud stocks on a price-to-sales basis. Aggregate 13F ownership rose 132% to 176.4 million shares, with 29 funds now holding Snowflake in their top 10, up from 15 in the sequential fourth quarter.

Why Snowflake? The most obvious answer is the company's superior growth prospects. In the fiscal fourth quarter ended Jan. 31, 2021, the company reported 116% sales growth to $178.3 million, as well as a net retention rate of 168%. This latter figure implies that existing customers upped their spending by 68% from the year-ago quarter. 

Money managers are likely also enamored with Snowflake's clear-cut competitive advantages. Its cloud platform, which is layered atop the most popular cloud-storage services, allows for the seamless sharing of information among its customers, even across competing platforms (e.g., S3, Azure, and Google Cloud).

Snowflake also shuns subscriptions in favor of a pay-as-you-go model. The company's clients pay based on the amount of data stored and Snowflake Compute Credits used. This method is transparent and designed to help companies better control their expenses.

But what's odd about such aggressive buying in Snowflake is that it's still really pricey. Even with Wall Street calling for 85% sales growth in fiscal 2022, Snowflake is valued at 62 times sales. For a company that's still years away from being profitable, it's a bit of a head-scratching move on the part of money managers.

A veterinarian holding a feisty dog in her arms.

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Another surprise is that veterinary health company Zomedica (ZOM 0.31%), which is a penny stock that became extremely popular among the Reddit crowd and meme stock investors in January and February, was bought hand over fist by institutional investors in Q1. According to 13F aggregator, ownership among 13F filers rose 1,092% (not a typo), to almost 101 million shares from the sequential fourth quarter.

There are two reasons I can propose as to why money managers bought into the Zomedica hype. First, the company commercialized its diagnostics platform for dogs and cats, Truforma, during the first quarter. Even though the company only recognized $14,124 in revenue from the sale of Truforma, Zomedica is officially no longer a pure clinical-stage drug and diagnostic development company. 

The other possible reason for money managers being bullish on Zomedica is the company's tie-in with companion animals. Data from the American Pet Products Association estimates that close to $110 billion will be spent on pets in the U.S. in 2021, $32.3 billion of which will be for veterinary care and product sales. It's been over a quarter of a century since U.S. pet expenditures have declined on a year-over-year basis. 

However, Zomedica is nowhere near profitability, and like Snowflake, is valued at a nosebleed price-to-sales ratio. Even looking more than two years out to 2023, Zomedica is trading at a multiple of nearly 40 times Wall Street's projected sales.

The other issue here is that Zomedica has been a serial share diluter. Although it's sitting on a healthy $278 million in cash -- most of which was raised by selling shares of its stock -- it's ballooned its outstanding share count to 974 million. With so many shares outstanding and a share price below $1, Zomedica looks like a candidate that may enact a reverse split.

A cannabis bud and small vial of cannabidiol oil next to a Canadian flag.

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Sundial Growers

Arguably the biggest shock of all is that money managers scooped up a lot of shares of Canadian marijuana stock Sundial Growers (SNDL 2.19%). Aggregate 13F filers ended the first quarter holding 69 million shares, which is quadruple the roughly 17.3 million shares held at the end of December 2020. However, to put things in context, these 69 million shares don't even represent 4% of the company's outstanding share count.

One reason institutional investors were probably excited about Sundial is the rapid growth of cannabis sales in North America. New Frontier Data has estimated that U.S weed sales could hit $41.5 billion by 2025. Meanwhile, cannabis analytics company BDSA is looking for Canadian pot sales to more than double to over $6 billion by 2026. The prospects for legalization in the U.S. are also better than they've ever been.

The other catalyst here might be Sundial's mammoth cash pile of 1.08 billion Canadian dollars ($895 million U.S.). Sundial's cash position could allow it to become somewhat of a special purpose acquisition company (SPAC) within the cannabis space.

What's really surprising about this move is that Sundial has been nothing short of a train wreck as an investment. To build up its mountain of cash, the company has diluted its shareholders into oblivion. Since the end of September, more than 1.35 billion shares have been issued, and more are likely on the way. There's also no concrete strategy how management will use this cash.

Plus, the company's actual pot growing and retail operations have been nothing short of awful. Gross cannabis revenue sunk 30% in the first quarter to CA$11.7 million, all while Canadian weed sales were on the rise. 

Despite this institutional inflow, Sundial remains one of the worst marijuana stocks investors can buy.