"Story" Stocks Abound
A "story" stock is one that has no earnings and is priced at stratospheric levels based on the story that investors tell about future profitability. Typically, story stocks ride a wave of investor enthusiasm and hype based on hopes and dreams that never come true. Eventually, investors become disillusioned and a tremendous crash results.
It's important to note, however, that some story stocks actually do work out over time when their potential is actually realized. Tesla is a great example of this. For years, the company was kept alive by investors hoping that the company would transform the automobile industry with its electric vehicles. While there's certainly still a lot of speculators in Tesla stock, there's no denying its success in reshaping the landscape of the automobile industry. Just remember that for every Tesla, there are likely 100 or more story stocks that fail.
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