Zombie stocks are stocks sold by companies that have, essentially, gone out of business, or are about to do so. They are often traded for just a few cents per share, but in most cases, even such small losses are not going to be worthwhile to the investor. A stock becomes a zombie because the company it represents is not expected to be able to meet its financial obligations anytime soon, if ever. Zombie stocks frequently wind up being worth even less than the paper on which the certificates are printed.

So, why are zombie stocks even traded? Usually the stock shares are sold off by investors who need to rid themselves of these assets so they can so they claim the capital loss on their taxes. As to why investors buy them – well, no-one knows for sure, but it is, at worst, a very low-stakes gamble – and it is just possible that these stocks might fluctuate slightly, allowing the investor to realize, say, a two-cent profit on a five-cent stock that suddenly jumps up to seven cents per share.

There is one instance, however, in which zombie stocks just might result in a higher payoff, and that is in the case of zombie biotech stocks. Occasionally, a small biotech startup will go deeply into debt on research and development, making its stock essentially worthless for the time being, and creating the possibility of imminent bankruptcy. If, however, the drug is developed on time, and is successful, the company could see a sudden, dramatic increase in profit that would benefit its shareholders. See this article at Forbes.com for more details on zombie biotech stocks.