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What a difference a quarter makes.

Following the end of the first quarter, nearly every marijuana stock was down to begin 2018. This wasn't a huge surprise given just how far most pot stocks had climbed since the beginning of 2016. To add to that, the impact of dilutive bought-deal offerings probably also began to weigh on marijuana stocks during the first quarter.

The markets' top-performing pot stocks in Q2

However, things turned around in a big way in the second quarter, with a half-dozen pot stocks galloping higher by at least 23% over just three months. There was simply no shortage of catalysts, whether it was the approval of the Cannabis Act in Canada to legalize recreational marijuana , or the Food and Drug Administration (FDA) giving the green light to the very first drug derived from the cannabis plant. In ascending order, here's where investors "found the green," so to speak, in the second quarter.

A female biotech researcher examining a flask filled with cannabinoid liquid.

Image source: GW Pharmaceuticals.

GW Pharmaceuticals: up 23.8%

It's probably no surprise whatsoever that cannabinoid-based drug developer GW Pharmaceuticals (NASDAQ: GWPH) was among the best performers during the second quarter. On June 25, the FDA approved GW Pharmaceuticals' lead drug Epidiolex to treat two rare types of childhood-onset epilepsy known as Dravet syndrome and Lennox-Gastaut syndrome. This is the first time the FDA has ever approved a cannabis-derived drug -- Epidiolex utilizes cannabidiol, the non-psychoactive cannabinoid best known for its medical benefits -- and is the first therapy approved by the FDA specifically for Dravet syndrome patients.

It's also noteworthy that GW Pharmaceuticals' lead drug received a unanimous vote of approval from the FDA's advisory panel back in April, which is what really sent its shares higher during the second quarter. With a chance to hit more than $1 billion in peak annual sales, all eyes are now focused on Epidiolex's launch, as well as whether or not GW Pharmaceuticals can expand its label to cover new indications.

On a broader basis, the approval of Epidiolex could also lead to discussions on Capitol Hill about rescheduling or removing cannabidiol from the controlled substances list.

Jars filled with trimmed cannabis lying on the counter.

Image source: Getty Images.

OrganiGram Holdings: up 29.3%

"Marijuana value stock" OrganiGram Holdings (NASDAQOTH: OGRMF) also had a very good quarter, as evidenced by its more than 29% gain. Though there's no specific catalyst that occurred in the second quarter that stands out, my suspicion is that two factors played a role in pushing this pot stock higher.

First, there was virtually no reaction from Wall Street after the company, on March 6, announced that it was expanding production at its Moncton facility in New Brunswick as a result of considerably higher-than-expected crop yields. This pushed OrganiGram's projected annual production at full capacity to 113,000 kilograms of cannabis from a previously forecast 65,000 kilograms per year. Its strong performance in the second quarter could finally be recognizing this added output and efficiency.

Secondly, yours truly has pounded the table on OrganiGram as attractively valued, at least relative to its peers. At just 30 times Wall Street's consensus EPS for 2019, OrganiGram is cheaper than just about any other Canadian grower. And while no official growth estimates exist beyond 2019, it very likely has a PEG ratio of well below 1, confirming its place as a potential marijuana value stock. Investors may have noticed this relative value and begun gobbling up shares of OrganiGram.

An indoor commercial cannabis grow facility.

Image source: Getty Images.

Innovative Industrial Properties: up 37.8%

If you're looking for a reason behind the strong performance for marijuana-based real-estate investment trust (REIT) Innovative Industrial Properties (NYSE: IIPR) , chalk it up to uniqueness. There's simply no other publicly traded company (of reasonable size, by market cap) at the moment that operates with a REIT structure in the cannabis space.

Currently, Innovative Industrial Properties has a half-dozen owned medical marijuana greenhouses in the United States that are located in five states. Management is also evaluating the addition of more properties, with $100 million worth of such deals being pondered as of the end of its most recent quarter.

The beauty of this business model , other than the $1 per share in aggregate dividends shareholders are receiving, is the predictability of the cash flow. Innovative Industrial is working out 15-year leases for its greenhouses -- it had an average lease term of 14.4 years in its most recent quarter -- with options for two five-year extensions. This generates predictable annual revenue for a business model that practically has fixed costs with minimal overhead. Investors have learned that if you want a marijuana stock with a dividend, as well as one with a reasonable forward price-to-earnings ratio, then Innovative Industrial Properties is the stock to consider.

Two businessmen shaking hands as if to signify an agreement.

Image source: Getty Images.

MedReleaf: up 51.8%

Of the cannabis growers, none had a better second quarter than Ontario-based MedReleaf (NASDAQOTH: MEDFF) , which rose by nearly 52%. Two moves stand out as reasons for its outstanding quarter.

The first, and lesser reason, looks to be its completion of a 164-acre property purchase for 21.5 million Canadian dollars and 225,083 shares of common stock on April 12. Contained on 69 acres of this property is the Exeter facility that MedReleaf plans to retrofit to grow cannabis. Retrofitting an existing facility, rather than building one from the ground up, saves time and money. Exeter is designed to quadruple MedReleaf's annual production to 140,000 kilograms a year, from a previous expectation of 35,000 kilograms annually.

The bigger catalyst was the announcement that Aurora Cannabis (NASDAQOTH: ACBFF) would buy MedReleaf in an all-share deal valued at around $2.5 billion. Although the deal hasn't closed, it represents a healthy premium from where MedReleaf had been trading when the deal was announced. It would also give Aurora Cannabis a genuine shot to lead all growers in annual production. Aurora Cannabis estimates that the combined entity would be capable of 570,000 kilograms of cannabis production a year when at full capacity.

A doctor with a stethoscope around his neck giving the thumbs-up sign.

Image source: Getty Images.

Cara Therapeutics: up 54.7%

Among the so-called "marijuana drug developers," none logged a more impressive quarter than Cara Therapeutics (NASDAQ: CARA) . Shares of the Connecticut-based company soared almost 55%, with most of that run coming in the final week of the quarter.

The primary catalyst occurred on June 27, when the company announced positive top-line data from a phase 2/3 study involving I.V. CR845, a kappa opioid receptor agonist that has absolutely nothing to do with cannabis or cannabinoids. The results of the study demonstrated that the 1 mcg/kg dose of I.V. CR845 provided statistically significant pain relief over the first 24 hours for patients who'd had abdominal surgery. Both doses (0.5 mcg/kg and 1 mcg/kg) also hit their secondary endpoint of reducing nausea and vomiting in the 24 hours following abdominal surgery. Though post-operative pain is a competitive indication, Cara would appear to have a potential winner on its hands.

Where Cara gets its association with the cannabis industry is through its development of CR701, which is a preclinical cannabinoid receptor agonist designed to treat pain. Compared to the other companies on this list, Cara is only loosely related to the marijuana industry, but given its inclusion in the North American Marijuana Index, I've chosen to include it here.

A dollar sign shadow being cast on a large pile of cannabis leaves.

Image source: Getty Images.

MariMed: up 104.4%

However, the one marijuana stock that has clear bragging rights over the entire field during the second quarter is Massachusetts-based MariMed (NASDAQOTH: MRMD) . It took just three months for shares of this professional management company to more than double. Why such an incredible run? Though no specifics stand out, I do have two viable guesses.

For starters, there have already been pronounced moves higher with most businesses on the growing side of the equation. That's left investors to search for the next big thing, and they believe they've found it with ancillary cannabis companies , or those that aren't directly involved with the plant. Businesses like Innovative Industrial Properties that lease out greenhouses, and MariMed, which provides valuable consulting services for the medical cannabis industry, could be overlooked gems.

The other factor at work here might simply be speculation. Listed on the over-the-counter (OTC) exchange, MariMed had regularly been trading less than 100,000 shares a day before mid-May. Since mid-May, though, volume has picked up dramatically, with a spike in mid-June on no news whatsoever pushing its share price through the roof. These unexplainable short-term, emotion-driven moves happen from time to time with OTC-listed small caps, and it might be the real catalyst behind MariMed's exceptional quarter.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.

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