Ever since man first spoke, man has told stories. Most stories are doomed to be forgotten. Every once in a while, however, man tells a story that captures the imagination.

Because of storytelling's power, it comes as no surprise that stories are told in the stock market. Stories have, in fact, always been a part of the stock market. Before Pets.com, there was the South Sea Bubble and Dutch Tulips. Before Tesla Motors (NASDAQ:TSLA), there was Amazon.com.

Stock market stories take off because they occasionally make the storyteller and early participants a fortune. They grow because the twin traits of human greed and herd behavior combine with optimistic sentiment to produce a dynamic that other participants can buy into. Story stocks, as a rule, are companies with vast end markets, great growth rates, and endless hype. They generally rally the most in the growth acceleration stage, where it is plausible to assign any growth duration and enough market participants will believe it. The bull market then carries the stocks up higher until the last incremental buyer buys. 

Today's story
Among the many story stocks today is Plug Power, Inc (NASDAQ:PLUG). Given Plug Power's recent roller-coaster history, many investors wonder whether Plug Power will succeed. 

Over the past year, Plug Power has indeed succeeded -- the company has grabbed significant market share and shown remarkable growth. This achievement by itself is not impressive, however, because anyone can capture market share in a sector that bleeds money. It is the fuel cell forklift sector's negative margins that deterred other companies from entering the market in the first place, allowing Plug Power to win contracts from Wal-Mart and FedEx

What would be impressive would be for Plug Power to keep and profitably monetize that market share. This is generally what investors call execution. Most investors assume that a company needs a hard moat such as patents or brand equity to succeed in that aspect, but as Tesla Motors and Amazon have shown, sometimes having great management that is one step ahead of the competition is enough. If management builds enough economies of scale, Plug Power can compete against Toyota or other potential entrants if and when they enter. 

With a short float of 22%, the market's current opinion is that management will not execute. This makes sense because the management has not executed before -- Plug Power's leadership team has over-promised and under-delivered for years. As a consequence, Plug Power has been in the red for over a decade and has lost close to $850 million since inception. 

That being said, past performance does not predict future returns. Having raised $124.3 million, Plug Power no longer depends on the market for survival capital. The company's chance of success is also better than it was in the past because the fuel cell forklift market is much larger than before.

Bottom line
Even though it is improbable that Plug Power will succeed, nothing is impossible. Some story stocks have a happy ending. The difference between the ones that do -- such as Tesla Motors -- and the ones that don't is execution.  As long as management executes and monetizes its market share, Plug Power can grow into its valuation. Whether that happens is something that investors will find out in the coming quarters.

Execution will also decide whether the Plug Power story has a surprise ending or not.

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Jay Yao has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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