Cult Stock
What Is a Cult Stock?
A cult stock portrays a stock that has a sizable investor following regardless of the company lacking with regards to its underlying fundamentals. Cult stocks guarantee that they will be the next big company after they make another discovery or get a large contract. They have an extreme fanbase that is energized by the uniqueness of the company and its product and the faith in its long-term achievement.
Nonetheless, the vast majority cult stocks don't give investors something besides a story, regularly generating very little, if any, revenue or profits.
Understanding a Cult Stock
Investors are initially drawn to a cult stock's true capacity, accumulating a position with the expectation that its potential will be satisfied and will give investors a substantial payout.
Cult stocks are additionally described by strong characters that run the company. Such characters see markets where none exist and are generally able to persuade doubtful investors to part with their money for their vision.
An illustration of such a personality is Apple (AAPL) pioneer Steve Jobs. It was said that Jobs was irresistible to the point that he made a reality distortion field (RDF) around him. A RDF connects with how individuals around somebody sees them. It is this type of personality and their stalwart confidence in their own product and company that can lead to the rise of a cult stock.
Cult Stock Success
Apple at one time was a cult stock, before its prime as quite possibly of the most famous and effective company in the world. It had an extreme group of adherents that cherished its PCs and software and investors that trusted in its prosperity, in spite of its unsteady history, small market share, and not exactly stellar fundamentals.
Of course, everybody knows the history of Apple's turnaround with the release of its iPod, trailed by the iPhone and afterward the iPad. Cult stocks can become great investments, however the story of Apple is a rare one.
Apple could not have possibly broken out like it had if not for the unique vision of Jobs who turned the company away from its original product offering to make products that generally didn't exist. Consumers weren't out of nowhere going to begin buying Apple PCs as a group when PCs and Microsoft had a stranglehold on the market.
It is this reason that analysts stress not to invest in cult stocks in view of their fame or promotion, however to really comprehend their value as a company to determine whether the statistical data points hold up and assuming the tides of the market are changing, like the story with Blockbuster and Netflix.
Instances of Cult Stocks
The biggest cult stock in recent times has been electric vehicle manufacturer Tesla (TSLA). It's a very much discussed and all around covered stock by the media. Notwithstanding, it has an unstable reputation with regards to generating consistent revenues and cash flows. In any case, investors have been unyielding in their support of the company and its stock price has benefited. Analysts and onlookers attribute the cult-like support to investor interest with the company's organizer and CEO Elon Musk.
Numerous miniature cap biotech stocks are cult stocks. While they claim to be working on a supernatural occurrence compound or medication, the greater part of them have no source of income as they gradually burn initial capital on research and development (R&D).
Different stocks that have had cult status incorporate any semblance of Micron (MU) and Fitbit (FIT). Quite a while back any semblance of Snapchat (SNAP), Netflix (NFLX), and Shake Shack (SHAK) were likewise viewed as cult stocks.
Features
- Cult stocks are stocks that have an extreme following by investors yet whose financial fundamentals don't support their sizable base.
- Financial analysts prescribe not to invest in cult stocks except if the raw numbers show them to be a strong investment as opposed to just publicity and fame.
- Investors are drawn to cult stocks due to the capability of their market and product.
- Cult stocks can likewise be portrayed by the strong characters leading them, like Tesla (TSLA) CEO and pioneer Elon Musk and Apple organizer Steve Jobs.
