Cult Stocks

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According to RealMoney's Tim Melvin, "Cult stocks shave been around in the financial market for as long as I can remember. These stocks attract unusual fierce allegiance from owners and equally vehement opposition from short sellers. They usually have some popular new product or service that is typically described as being "game changing" or "revolutionary." The debate between buyers and sellers of these stocks is far more vocal and strident than the usual genteel Wall Street discussion of the merits of various investment opportunities. And most of the time, like all cults, the end result is less than positive for the enthusiastic bulls of these stocks.

"The way to avoid cult stocks and the inevitable bad ending is to always do the work. Investing, as Ben Graham pointed out, works best when most business-like. Avoid the hype and the promotion, and focus on the value of the business, and you will never find yourself with a glass of Kool Aid in one hand and worthless stock certificate in the other."

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