Cult stocks are favorites among investors. Remember Taser (TASR) and it’s breath-taking run up from pennies to over $30 in 2004?
I love writing about cult stocks. I get the most interesting emails- truly illuminating about their authors. When I “attack” cult stocks I get emails ranging from those calling me a sub-human to suggesting I do things on behalf of foreign governments ranging from Russia to Mars. My email has been boring lately so it is time to write about the cult stocks of 2011.
Do not confuse my negative attitudes about cult stocks as negative attitudes about the companies. Most cult stocks belong to very fine companies. But it is hard to justify a P/E of 130 on a stock growing less than 10% a year when Apple (AAPL) has a P/E of roughly 20-22 and doubled in size during the thirty months of the Great Recession.
Here is a sampling of some of my favorite cult stocks you many want to avoid if you are an investor or longer term trader. The estimates on potential stock prices are all mine and based on historical trends and data of other companies in their market segment, not a Ouija board. I am not suggesting you short them, a truck that is out of gas can still run you over if there are fumes left in the tank. Just be aware how overextended these cult stocks are based on underlying business fundamentals.
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