Don’t Drink the ‘Cool-Aid’
Cult Stocks
7 Money-Doublers for the 1st Quarter Surge
When we were teenagers, it was all about fitting in. We needed the right clothes, the right hair, the right car. We looked up to the popular kids and would have done just about anything to get in their exclusive club. Now that we’re all grown up, it always amazes me when investors blindly follow the “popular” stocks, i.e., cult stocks, regardless of their fundamentals. And just like high school, while the ride may be fun for a while, eventually it will come to an end.
The stocks on this list have been immensely popular with investors, and while I’m not saying they couldn’t go any higher, the upside potential in each is very limited, whereas the downside risk is substantial. I used simple, back-of-the-envelope methods to calculate upside and downside targets for these cult stocks. First, I looked at the upside using the current trendline and past highs, and then looked at analyst estimates for real-world growth in the company. For the downside, I estimated the price based on a return of the valuation of the company to segment and market norms. Yes, admittedly, this contains a lot of speculation and opinion, but any of these overpriced cult stocks could blow up on bad news. If I were you, I wouldn’t drink the “Cool-Aid.” (more)
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