Cult stock companies also tend to trade entirely out of whack with reality. This doesn't mean that all of the companies are set to fail, but many just stay in limbo for years and years. Some cult stocks may be tiny little basic manufacturers that are lined up to win a blue-chip company order that will take the company from nascent revenue up to the $100-million mark instantly. These companies literally can have only a handful of full-time employees and can cross a wide variety of industries.

Finally, cult stocks are generally thought of as futuristic or controversial investing subjects. (To learn more about growth and stocks, read Is Growth Always A Good Thing?)

Making a Buzz
Some of the buzzwords that are most frequent around cult stocks are the following: alternative energy, nanotechnology, robotics, artificial intelligence, future warfare, genomics, proteomics, homeland security, extreme entertainment, emerging retail and virtual reality. Not all of those descriptions define a cult stock, but they are a good place to start looking for these exotic stocks.

Biotech zombies, companies that have never produced one selling drug or compound or ones who have failed their only clinical trial(s) and have no prospects, often become cult stocks. At times, some of these will even trade as discounts to their net cash value. It is very rare that these biotech zombies decide to liquidate cash and return it to shareholders. They almost always would have large shareholders that are buried with losses, so the companies stick around in the hope that a major discovery is accidentally made or that they are able to buy into a drug discovery candidate with a university or research institute. This type of cult stock can quite literally jump exponentially on the hint of a partnership. (Keep reading about zombies in Chasing Down Biotech Zombie Stocks and Haunting Wall Street: The Halloween Terminology Of Investing.)

Waiting for the rebound
Often past " fallen angels" become cult stocks. There are many stocks that used to trade with multi-billion market caps and high stock prices back in the tech- bubble days of the late-'90s and early 2000s, but now trade as very low-priced stocks. It is amazing how many of these companies are out there, and they are located globally. These are on all continents and are sometimes ex- S&P 500 companies. When a stock falls 90% and its prospects are down and out, you can be assured that there are many retail investors still holding in hope of a turnaround. Some investors refuse to accept that they will lose money, and they will continue to hold their shares until whatever end will come. That, in and of itself, can create a cult following.