Apple Inc. (AAPL), Netflix, Inc. (NFLX), Tesla Motors Inc (TSLA) — Are These Cult Stocks Buys?

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When a stock reaches “cult” status, the upside can be tremendous. Big share price moves on big momentum buying can propel these stocks into the stratosphere. Unfortunately, when the fuel runs out, these same stocks can fall back to Earth, and it can be quite painful for investors who hang on for the ride.

Three of the biggest cult stocks of the past few years are Apple Inc. (NASDAQ:AAPL)Netflix, Inc. (NASDAQ:NFLX) and Tesla Motors Inc (NASDAQ:TSLA). Each of these companies has a cool product that has redefined its respective space and all have loyal brand followings. Each also has seen a tremendous rise in share price, making investors who got in early huge amounts of money.

Yet the life cycle of a cult stock is one investors need to pay particular attention to. More specifically, you need to know what life stage that company is in if you want to make real money and avoid big losses.

Apple Inc. (NASDAQ:AAPL)Apple Inc. (NASDAQ:AAPL) is the elder statesman in this trio of cult stocks, having sold products for far longer than the relatively youthful Netflix, Inc. (NASDAQ:NFLX) or new kid on the block Tesla Motors Inc (NASDAQ:TSLA). Over the past decade, investors who bet on AAPL have been rewarded like kings. The stock surged more than 6,200% from September 2003 to its all-time high just above $705 in September 2012, one of the biggest moves of any company over that period.

Unfortunately for Apple Inc. (NASDAQ:AAPL) lovers, the recent past has been far less appetizing. Over the past 52 weeks, the shares are down some 30%, and since the beginning of this year, the stock has lost more than 10% of its value.

The downturn in Apple shares shows that no matter how mighty your track record may be, when you’re a cult stock investors tend to fall out of love fast.

Apple Inc. (NASDAQ:AAPL)’s latest product announcement of an upgrade to its iPhone line on Wednesday might have been pleasing to the die-hard Apple tech fans, but in terms of the stock price, the announcement was a dud. Shares sold off hard after the big reveal, down 5% on the day, confirming that AAPL has now entered the retirement stage when it comes to its life as a cult stock.

As for Netflix, Inc. (NASDAQ:NFLX), this is a turbulent stock that’s gone through more than its share of growing pains. The video rental and streaming entertainment service company enjoyed a 900% run in its shares from 2009 to midway through 2011. The company stumbled several times, though, including a misstep over separating its DVD and streaming services, and the shares subsequently plummeted about 80% over the next year.

Yet the decline in NFLX wasn’t the end of this story. The company got a second wind last year, thanks in part to some provocative original content programming, and NFLX is back to must-own cult stock status. Over the past 52 weeks, shares are up more than 425%, proof that a winning cult stock can fall out of favor, and then pick up the pieces and move higher. Apple Inc. (NASDAQ:AAPL), are you listening?

Now, while Netflix, Inc. (NASDAQ:NFLX) is on the upswing after the tumult it’s seen in recent years, it’s been smooth sailing for the youngest cult stock, Tesla Motors Inc (NASDAQ:TSLA).

The all-electric vehicle maker’s stock is up 590% since it began trading in 2010, and the bulk of that upside has been seen over the past 52 weeks.

The success of Tesla Motors Inc (NASDAQ:TSLA)’s Model S sedan, and the incredible buzz generated by the quality of its product, as well as the backlog of demand for this truly unique luxury vehicle, has made TSLA the cult stock of the decade so far.

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