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.

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  1. What is the performance cult?

    In the late '60s and early '70s, the bull market and media scrutiny of fund managers had made heroes of the so-called gunslingers ... Read Answer >>
  2. Why is an increase in capital stock on a company's balance sheet a bad sign for stockholders?

    Understand what capital stock represents for a company and understand the significance for investors when a company initiates ... Read Answer >>
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