Question

What’s the pure play approach? Any advantages and disadvantages?

Answer 1

A pure play approach is a approach in whcih a company focuses all of its efforts on a single business, product, or industry. For example, a company that specializes in manufacturing vacuum cleaners and doesn't make another type of product could be considered a pure play.

Advantages and disadvantages of pure play approach.

There are some good reasons to invest in pure play stocks.

For one, pure plays are generally simpler to analyze than diversified businesses. The revenue and growth of pure play businesses are easier to interpret than those of businesses whose revenue comes from several different sources. If a business' income comes from a variety of products, then it may be subject to different profit margins and industry growth benchmarks, making it difficult to evaluate the health of the company as a whole.

Secondly, pure plays offer the potential for high rewards if things are going well.

However, pure plays have disadvantage too ,

a pure play business is not diversified whatsoever. So if its particular business goes through difficult times, then the company's revenue could drop sharply, as there are no other lines of business to offset each other's poor performance.