The cannabis sector has had quite the ride over the last year. We can see this with the ETFMG Alternative Harvest ETF (MJ  ), an ETF that tracks the marijuana industry which was up more than 3x from October of last year to February of this year. Since February, shares are down by more than 50%.

In a nutshell, the sector's massive gains were fueled by three factors - increasing retail involvement in markets, resulting in inflows into speculative stocks, Democrats' taking control of the executive and legislative branch, increasing hopes that some sort of federal legalization would be imminent, and the massive rally in growth stocks.

Each one of these factors has unwound to some degree. As the economy returned to normal, retail traders and their favorite stocks fell back to Earth. The Democrats' 50/50+1 edge in the Senate has proven to be much less of an advantage given some centrist dissention in the ranks. Additionally, legalization of marijuana has never been a top priority for President Biden as he continue to hold old-school views on the issues that are not in alignment with the party or even country.

Finally, the rally in growth stocks has also unwound to a healthy degree as cyclical and value stocks grabbed the baton in recent months. Even now, while many growth stocks have recovered, more speculative ones have failed to meaningfully rally.

Looking ahead, something similar seems to be happening in the cannabis sector. High-quality ones are trending higher, while lower-quality ones continue to flounder. In essence, it's increasingly seeming like cannabis is simply a commodity that can be produced at a very low cost with minimal barriers to entry.

This means that growing and cultivating the crop is not likely to be a great business. Further, there are always new advances which increase yield and quality. Instead, the companies that are doing well are providing services to the growers or creating more value-added products.

An example is Innovative Industrial Properties (IIPR  ) which essentially leases real estate, warehouses, and storage space for cannabis companies. And, the company seems to be intent on growing into more of a full-service logistics solution for the industry.

Given attitudes toward legalization and growing use, it's quite likely that cannabis will continue growing at a healthy clip over the next decade. Yet, the growers are likely to remain poor long-term investments.