Narrative investing

Narrative investing means recognizing that a stock's price can be driven, at least for a period, more by the story investors believe about a company's future than by its current financial results. A compelling narrative around a new technology or market opportunity can push a stock's valuation well ahead of what its present-day numbers would justify.

This is not automatically irrational, narratives sometimes turn out to be true, and being early to a correct narrative can be highly rewarding. The risk is that a narrative can also be wrong or overextended, and a stock priced heavily on story rather than substance can fall hard if the story stalls or the numbers fail to catch up.