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When Stock Stories Are Fairy Tales


abcnews-articleThe following is an excerpt from DAVE GILREATH | October 3, 2016 | abcnews.go.com |

Like many investors, you may own shares that you bought at least in part because you liked what you’d heard about the company. This could be because the company had been the subject of a high level of media coverage. These are known as "story stocks" simply because they’re the subject of many stories based on the interesting concept underlying the enterprise.

To some extent, these shares trade on their renown, and often, this renown develops or gains momentum from famous and charismatic executives who have captured the fancy of the media. Sure, it helps to have market-leading products and sound financials, but nothing advances a company like heavy infusions of capital from stock purchases driven by public attitudes that sometimes approach idolatry.

Examples of story-stock companies include:

Tesla Motors, the manufacturer of sleek, all-electric vehicles, gets a boost from bountiful media coverage and a media obsession with the company’s co-founder, CEO and product architect, Elon Musk. He recently made news by announcing that his private space exploration company, SpaceX, is planning to put humans on Mars within six years.

Berkshire Hathaway, the investment company headed by the legendary Warren Buffett, perhaps the most widely quoted and imitated professional investor on the planet. To the extent that Berkshire Hathaway relies on Buffett to sustain its story, that sustenance will probably dwindle in the coming years, as new blood takes over. Already, these investor successors are making moves markedly different from classic "Buffetteering."

Apple, which dominates the business news with its constant iPhone iterations and which gained renown because of the public's fascination with the innovative brilliance of the late Steve Jobs. Though Jobs died in 2011, the legacy of his genius continues to feed the Apple story.

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