There are a lot of reasons why stocks may make sudden big moves higher. Strong earnings, broker upgrades or exciting product launches can all lead to
Sometimes those three things can combine to form a fourth reason for a stock to jump higher… Hype.
In some cases, stocks get hyped because they have performed well in the past. In other cases, stocks get hyped because Wall Street expects big things in the future. Regardless of the reason behind the hype, once a stock obtains a certain level of hype, it can trade higher on the hype alone.
Hype can also be referred to as "investor euphoria," such as that cited by Netflix CEO Reed Hastings recently. Hastings said his company's stock had been the beneficiary of some investor euphoria recently. Of course Hastings calling attention to the fact that the stock's price seemed to have become disconnected from fundamentals caused it to lose some of that valuation after his comments.
Investors should be weary of jumping into stocks simply because they are being so hyped by Wall Street. In some cases, the hype is merited, but in other cases it sort of takes on a life of its own, and if you are not careful you will find yourself following the herd into over-inflated stocks. This never ends well.
This week we are going to take a closer look at five stocks with a lot of hype and try to determine whether investors should buy into the buzz, or look for better places to invest their money.