Finance Glossary

What is a Pure Play?

What is a Pure Play?

Image Credit: Matthew Tosh (CC by 2.0)

A Pure Play? – Image Credit: Matthew Tosh (CC by 2.0)

A pure play refers to a stock for a publicly traded company that focuses primarily on one specific industry. It is more or less the opposite of a diversified business. For example, Netflix (NFLX) might be considered a pure play since it focuses on almost exclusively on producing and streaming entertainment content. In contrast, Amazon (AMZN) would not be considered a pure play since in addition to streaming, it is also a major online retailer. The appeal of a pure play for an investor is that the stock will only be affected by one industry; potential investors do not have to worry about dipping their toes in a variety of business concerns. It also usually makes a stock easier to analyze since many values used in stock analytics are based on how well other stocks in the same peer group perform. With a pure play, the peer group is easier to determine: a coffee company can be compared to other coffee companies. With a more diversified business, finding the right peer group for comparison may be more difficult.

 

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