Story Stock

AAA

DEFINITION of 'Story Stock'

A stock whose value reflects expected future potential (or favorable press coverage) rather than its assets and income. A story stock trades markedly higher on optimistic expectations about its potential profits down the road. A story stock’s valuations are generally out of line with its fundamentals, since investors are willing to pay a hefty premium for the stock to participate in its future prospects. Most, but not all, story stocks tend to be clustered in dynamic sectors such as technology or biotechnology, since the lure of owning a piece of a company that discovers the cure for cancer or invents a new fuel source is one that few investors can resist.

INVESTOPEDIA EXPLAINS 'Story Stock'

Story stocks can often be recognized by the substantial amount of media coverage they garner. Because of their near-constant presence in the public eye, a story stock may attract heavy trading volume for many months, until a new contender displaces it in the public imagination. Although a few story stocks go on to achieve great success, most fail to live up to their promise.

The abundance of story stocks depends on prevailing market conditions. Story stocks are commonplace during strong bull markets and flourish during such periods, but are relatively rare when bearish sentiment grips the markets.

The industry sector that generates the most story stocks depends on the investment theme that investors are enamored with at a particular time. During the 1990s, for instance, technology and dot-coms spawned countless story stocks in what was arguably the golden age for them. In the 2003-07 bull market, a period of skyrocketing commodity prices and triple-digit crude oil, most story stocks were either resource-based companies or in the alternative energy space.

While a typical story stock has numerous supporters, its rapid rise and rich valuations also tend to attract short-sellers who are skeptical about the company’s long-term prospects. As a result, a story stock will usually have above-average short interest, which contributes to its significant price volatility.
 

RELATED TERMS
  1. Tenbagger

    An investment that appreciates to 10 times its initial purchase ...
  2. Ovoboby

    A condition in which a market is considered to be overbought, ...
  3. Abnormal Return

    A term used to describe the returns generated by a given security ...
  4. Fully Valued

    A stock whose price analysts believe reflects the market's recognition ...
  5. Lemon

    A very disappointing investment. A lemon is an investment in ...
  6. Overbought

    1. A situation in which the demand for a certain asset unjustifiably ...
Related Articles
  1. Active Trading Fundamentals

    Is Your Psyche Ready For A Bull Market?

    Not all investors are mentally prepared for when a much-awaited bull market finally comes charging in.
  2. Fundamental Analysis

    Great Expectations: Forecasting Sales Growth

    Predicting sales growth can be something of a black art, unless you ask the right questions.
  3. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  4. Active Trading

    5 Questions To Ask When You're In A Trading Rut

    If you're in a trading rut, ask yourself these five questions to help turn the corner.
  5. Economics

    Industries Prone To Bubbles And Why

    Investors who want to avoid future bubbles should learn from the past in order to protect their investments.
  6. Markets

    Valuing A Stock With Supernormal Dividend Growth Rates

    If these calculations are off, it could drastically change the value of the shares.
  7. Markets

    A Primer On The Biotech Sector

    Investing in the biotech sector can involve both huge losses and major gains.
  8. Trading Strategies

    When Is A Bull Market Not A Bull Market?

    During some bull or bear moves in the stock markets, investors will be going with the trend, but day traders may find they cannot.
  9. Economics

    The Myth About Market Bubbles

    Bubbles have made and ruined fortunes. Though they can be difficult to predict, understanding how they work gives you a visible advantage.
  10. Retirement

    Stock Ratings: The Good, The Bad And The Ugly

    Stock ratings are both loved and reviled. Find out why they deserve equal measures of both.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center