Tired of numbers? Great! Today we are looking at story stocks; specifically stocks with stories that are compelling, inspiring, seductive… and problematic.
When it comes to investing, there are few things as powerful as a good story. This is something of a paradox, as in finance, numbers underpin everything; even the best story stock might be a terrible investment, but there’s no way to know that without checking the numbers. I maintain, however, that the same is not true in reverse, i.e., the worst story stocks are, in fact, beyond the redemption of the numbers, because they cast doubt on the veracity of those numbers.
The financial world is full of stories that were consciously designed to steer listeners toward particular stocks. I say financial world and not financial media because the latter is only the tip of the iceberg. Back in the day, when I was one of a few hundred-thousand smile-and-dial stockbrokers, we lived or died by the power of our stories, and it’s easy to see why: no one wants to talk to a stranger on the phone about P/E ratios. In 1995, the year I got my license, I told the same story — something to do with the incredible burgeoning power of the internet — to justify every technology stock I pitched.