Also known as glamour stock, glamor stock is any type of stock that is well-known among investors and enjoys a high level of popularity, based on its consistent positive movement within the markets where the shares are sold. As a result of the popularity, these types of stocks are normally in high demand, with investors constantly on the lookout for any shares that may be offered for sale. The level of demand for shares of a glamor stock will often mean investors are willing to pay a little more than current market value, simple because of the confidence that the performance of the shares will justify doing so.
Along with the higher price-earnings ratio that glamor stock can command in the marketplace, the reputation of the stock is often built over a number of years. In some cases, the general public will also be aware of this type of stock, especially if that stock is associated with a brand name that consumers are very familiar with and have possibly trusted for a number of years. There are also glamor stock offerings that are not associated with brand names, but are well known in the investment world. Those shares are often the focus of institutional investors, and may or may not go unnoticed by individual investors who tend to think more along the lines of consumer-based investments.
Recognition as a glamor stock typically requires building a solid reputation for consistent performance in the marketplace, even during economic conditions that are less than desirable. Stock of this type will generally move upward in value with only occasional dips in the price per share. Even when some sort of decrease occurs, that dip is usually less than similar stock offerings and tends to recover quickly, factors which further limit the risk associated with owning shares of the stock. Since glamor stock tends to hold its value, investors consider the shares to be excellent investments for the long-term, and may serve as the anchor or foundation for an institutional portfolio.
After achieving the status of glamor stock among investors, the task of continuing to increase in value at an acceptable rate, as well as resist decline during adverse economic conditions, remains key to the reputation of the shares. Should events occur that undermine the stock, such as new technology rendering the goods offered by the issuing company obsolete, it is possible to lose this status as profits plummet and the value of the shares do likewise. For this reason, many companies that issue shares considered to be glamor stock will attempt to remain in the forefront of their industries and take action to minimize any type of issue that could damage the reputation of the business and in turn harm the performance of the shares.
