Cult Stock


DEFINITION of 'Cult Stock'

A classification describing stocks that have a sizable investor following, despite the fact that the underlying company has somewhat insignificant fundamentals. Typically, investors are initially attracted to the company's potential and accumulate positions in speculation that its potential will be fulfilled, providing the investors with a substantial payout.


While most of these cult stocks promise they will be the next big story after they make a new discovery or get the newest contract from the government, most do not provide investors with anything other than the story. Furthermore, these stocks typically generate very little, if any, revenue at all.

For example, many micro-cap biotech stocks are cult stocks. While they promise that they are going to be working on a miracle compound or drug, most of them do not have any source of income as they slowly burn away their initial capital in research and development.

However, some cult stocks do occasionally make good on their stories to become successful. For example, Research in Motion was once a widely followed cult stock that had a great story that attracted many investors, but no revenue. Fortunately, its BlackBerry PDA device became a runaway hit, which elevated the cult stock to its multibillion market capitalization status.

  1. Dotcom

    A company that embraces the internet as the key component in ...
  2. Speculation

    The act of trading in an asset, or conducting a financial transaction, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent ...
  4. Volume

    The number of shares or contracts traded in a security or an ...
  5. Pump And Dump

    A scheme that attempts to boost the price of a stock through ...
  6. Fundamentals

    The qualitative and quantitative information that contributes ...
Related Articles
  1. Markets

    Buying Into Corporate Research & Development (R&D)

    Investors take note: companies that cut research and development are in danger of saving today but losing big tomorrow.
  2. Active Trading

    Sorting Out Cult Stocks

    Is that crazy product going to be the next big thing? Learn how to evaluate these companies here.
  3. Investing

    The Ins and Outs Of In-Process R&D Expenses

    Are these charge-offs fair accounting or earnings manipulation? Learn more here.
  4. Investing

    Chasing Down Biotech Zombie Stocks

    Find out whether you have "living dead" stocks lurking in your portfolio.
  5. Investing

    A Look at 6 Leading Female Value Investors

    In an industry still largely predominated by men, we look at 6 leading female value investors working today.
  6. Investing

    Small Cap Investing: How to Think About Illiquidity

    Do your homework, have a long term view, exercise patience, you'll find that investing in small market capitalization stocks is no riskier than investing in large stocks
  7. Mutual Funds & ETFs

    3 Low Volatility ETFs to Ride Out Market Turmoil 

    Volatility is part of the current environment, but that doesn't mean investors can't be safe and also capitalize. ETFs can be a great defense.
  8. Investing Basics

    How to Make Small-Caps Win for Your Portfolio

    Small-cap stocks can offer generous returns, but you need to know how to find the right ones. Here's a little help.
  9. Economics

    Explaining Silo Mentality

    A silo mentality occurs when certain departments in an organization do not share information or knowledge with other departments.
  10. Economics

    5 Steps of a Bubble

    In the financial sense, a bubble refers to a situation where the price of an asset far exceeds its fundamental value.
  1. Why did dotcom companies crash so drastically?

    The craze of the dotcom bubble and the flood of capital that came with it led to many back-of-the-napkin business models ... Read Full Answer >>
  2. What are the most important equity market indexes?

    The most important equity market indexes are the S&P 500, Nasdaq Composite and Russell 2000. These indexes in total provide ... Read Full Answer >>
  3. What is considered a good turnover ratio for a mutual fund?

    What is considered a good turnover ratio for a mutual fund depends on the fund's composition and structure, its stated investment ... Read Full Answer >>
  4. Is it more beneficial to invest in a blue chip stock or a penny stock?

    Penny and blue-chip are terms used to describe a stock's valuations and statures. Penny stocks are generally the stocks of ... Read Full Answer >>
  5. What is the difference between a penny stock and a small cap stock?

    A penny stock and a small-cap stock represent the shares of a company with low market capitalizations. However, there is ... Read Full Answer >>
  6. How can I tell whether a particular small cap stock has a positive investment outlook?

    The investment outlook for a small-cap stock is determined by operational outlook and current stock price. The operational ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!