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While many cannabis stocks have been white hot this year, not all are seeing green. In fact, as Cowen & Co. notes, there has been a spate of profit-taking recently, as investors take a more cautious stance ahead of first-quarter earnings reports.

The back story. While many marijuana stocks have notched big gains in 2019, volatility is the name of the game. While there could be big growth opportunities for cannabis companies, they also face headwinds ranging from ongoing supply shortages to the U.S.’s patchwork approach to marijuana laws (in which individual states, not the federal government, move toward legalization—or not). Still, that has done little to dampen investor enthusiasm, not just from individuals, but also institutions, consumer-staples giants, and retailers.

What’s new. Cowen & Co.’s Andrew Stein writes that revenue estimates for cannabis stocks have been coming down recently, as investors are moderating their expectations for the coming first-quarter reporting season. That has led to “profit-taking across the sector,” with net flows largely weighted toward the sell and short side. “This correlates to the overall consumer sector money flow we have been seeing as investors shift to a more defensive stance after the strong year to date equity returns,” Stein writes.

Looking ahead. That said, Stein doesn’t think it is all bad news for the industry. Individual companies, including Aurora Cannabis (ACB), Aphria (APHA), and Charlotte’s Web (CWBHF), have significantly outperformed over the past week, he notes. On Monday, Aphria reported an adjusted loss of 20 Canadian cents per share, while Wall Street had been expecting a loss of 4.5 Canadian cents.

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Meanwhile, Tilray (TLRY), a laggard in the industry with a year-to-date slide of more than 30%, has seen some bullish trends recently, with more investors willing to add to their positions as it trades below $50. However, Cronos Group (CRON) has largely been hit with investors selling their long positions, according to Stein’s research.

The recent downward pressure on cannabis stocks looks temporary to Stein. Ultimately, he believes investors will use “this downturn as a buying opportunity as most are convinced that this sector remains a second half 2019- 2020 story.”

Write to Teresa Rivas at teresa.rivas@barrons.com