Some people are famous because they're famous (think Ashton Kutcher). Some assets rise in value because they rise in value. Sometimes they're called momentum stocks; at others they're called fad stocks. Their nature is to rise – sometimes exponentially – until the public in general changes its mind.
I tripped across one of these last night while I was idly thumbing through the stocks in my Wrecks list – – none other than Jones Soda, which I had sort of forgotten about. Jones is a maker of specialty beverages (including some really tasty cream soda) that had a spectacular run of about 17,000% from late 2002 to April 2007. For some reason, people thought that cane sugar-based drinks (which are admittedly way better than the corn syrup junk most people drink) would be in every pantry in America.
What took me by surprise when I saw the chart last night was just how far this thing had fallen. It is down about 98%, has a market cap of only $12 million, and apparently is looking to simply be bought out at this point.
So the question to ponder at this point is………what are the "fad" stocks right now? What assets have zoomed up in price simply because they'd been bid up for months on end? Apple? Amazon? Or – dare I say it – gold? Not everything that goes way up in price is fated to plunge. But sometimes what creates an asset's value can largely be based on such animal spirits. It's worth considering.
