On Cult Stocks: A list I put together years ago
1) Investors buy and never sell.
2) Failures presented as opportunities to buy more.
3) Defectors face attacks, ostracism
4) Shareholders seek group approval. Board "leaders."
5) Traditional investing requirements don't apply. e.g. timely audits. clarity
6) Huge % of investors' funds tied up in the cult stock.
7) Sensible diversification or tax loss selling never discussed.
8) Desire to meet other cult members. Huge turnout at SH meetings.
9) Groupthink. "Them Versus Us." Siege mentality.
10) Doubt, and dissent are discouraged or even punished.
11) Often said: "If no one sells, the stock can only rise"
12) Affinity investors. SHs encouraged to recruit others into Group
13) Ultimately there may be SH bankruptcies, even suicides
Two red flag phrases often encountered with cult stocks:
"Long and Strong"
"Stay the Course"
What's wrong with cult stocks? For one thing, they're usually overpriced and therefore poor investments. Economic reality trumps fantasy in the long run. The end is usually an utter collapse.
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Because the Good Life is Just a Pump or Two Away
