3 Signs a Story Stock Can Reach Its Potential

A story stock is one that investors choose because of the story behind it instead of actual fundamental analysis. Many times, investors are lured in to investing in a particular stock because of the potential it conveys instead of its actual performance. While this is risky, here are a few signs that a story stock might actually live up to its potential.

1. Revolutionary Invention

If a company is on the verge of creating a revolutionary invention, the stock may be able to live up to its promising image. Start-up companies that are working on a great new invention could potentially bring in substantial revenue in the future. For example, let's say that a company were on the verge of creating the first car that could run completely on water. Even if all the technology were not available yet, they might be close to perfecting it. During the research and development stage, they may not be working on many other projects. Therefore, their financial numbers may not be the best during this period. However, if they were to successfully create the car, their stock price would shoot through the roof. If you were an investor before they created the car, you would stand to reap some huge benefits.

2. Solid Management

Another indicator that a story stock might be able to reach its full potential is a solid management team behind the company. As an investor, you should pay special attention to the executives that are in charge of the company. For example, a former executive that was very successful with a different company has started his or her own company. If you strongly believe in this individual's ability to run a company, you might decide to invest in it without seeing good financial numbers. If the executive team were good enough, they might be able to run the company successfully in the future.

3. New Industry

Another sign that you might be looking for in a story stock is a new industry that shows potential. If you get in on the ground floor of a new type of industry, you could potentially realize a substantial return on your investment. By choosing a company that is involved in this new industry, you could provide yourself a vehicle by which to take advantage of the industry as a whole. For example, let's say that a new form of fuel were discovered and that several different companies were involved in its production. As an investor, you know that the fuel will eventually replace oil as the main fuel source for the world. In order to take advantage of this huge potential, you could invest in one of the companies involved in the industry. They may not have great numbers currently, but as the fuel becomes more widely available, you will be able to make some substantial gains in your investment portfolio.

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