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. Volume

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

    A scheme that attempts to boost the price of a stock through ...
  5. Zombies

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

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  6. Investing Basics

    Explaining the Fama and French Three-Factor Model

    The Fama and French three-factor model expands on the CAPM to provide a more thorough tool that measures portfolio performance and predicts future returns.
  7. Stock Analysis

    What Markets Poised to Benefit if the Fed Waits?

    Late last month, the Fed reminded that a 2015 rate hike is still a possibility; there are certain segments of the market that are more sensitive to changes.
  8. Chart Advisor

    Small Caps Are Just Too Risky At These Levels

    With the rise in the markets over the past few weeks many traders are starting to wonder if now is the time to buy small caps. These 3 charts suggest that it may be best to wait.
  9. Chart Advisor

    These 3 Charts Suggest That The Markets Could Head Lower

    Markets have been moving higher in October, but these three charts suggest that the story could be getting ready to change.
  10. Professionals

    5 Career-Killing Facebook Mistakes

    Facebook might be a great way to show off those cute pics from your vacation -- but your page isn’t so great if it hurts your career.
  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. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center