Pure-Play Stocks - Are They Worth Your Investment?
Author: George Davis
If you are looking to invest in a company that is easy to analyze with greater financial rewards than pure-play stocks is your way to go. Find out how pure-play stocks can improve your investment portfolio.
When you are looking to make a strong investment portfolio, what do you look at? Perhaps you find a company that has a good market reputation, or you follow a professional trader’s portfolio. Regardless of your approach, your primary objective is profit maximization. However, you cannot attain substantial profits unless you have a secure investing portfolio. To find a safe investment, veteran traders always go for pure-play stocks. This is because pure-play stocks are those whose issuing companies have only one line of business.
In this blog post, we will explain “what are pure-play stocks” and are they worth your investment. So keep reading to increase your knowledge about stock trading.
What Are Pure-Play Stocks?
Pure-play stocks are those whose issuing companies have a single product/service line or operate in only one industry. These companies have experience and expertise in their industry; hence, they are strong market players with a strong customer base. Initially, you should be looking for companies that have captured a large segment of the market. But if you are investing in pure-play stocks, you don’t need to worry about market share as pure-play companies have firm grounds within their industry.
Are Pure-Play Stocks Worth Investing?
Diversification has been at the forefront of the stock market. After all, top-tier investors advise against putting all your eggs in one basket. However, the trend for pure-play stocks has been increasing over the years. This had led to the questions like “why invest in a company with only one line of business?” There are several reasons to investing in pure-play stocks, and we are sharing them below.
1. Easy to Analyze
The most crucial reason investors invest in Pure-play stocks is that these companies are easy to analyze. Since they have only one line of business, all the earning can be justified through the balance sheet, and there are no problems tracking payment history and cash flow.
2. Predictable Business Model
Pure-play stock companies have a predictable business model because they usually work in straightforward industries. This is a huge advantage over investing in companies with diversified portfolios because investors have difficulty predicting their business model.
3. Greater Financial Reward
Pure-play companies have the edge over diversified companies because they have a niche market. When such companies become popular for their product/service, their revenue grows faster than diversified companies, which offers greater rewards for investors. In addition to greater financial rewards, pure-play companies have sufficient experience and finances to recover from a financial slump. So your investment will be pretty much safe if nothing goes wrong.
Pure-play stocks are often safer than investing in companies with a diversified portfolio. Greater financial reward, easy to analyze, and predictable business model are some of the reasons why investors prefer investing in such businesses. Once you start buying pure-play stock, you will understand its true potential.
1.Olin Corporation (OLN)
2. ArcBest Corporation (ARCB)
3. Herc Holdings Inc. (HRI)
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