Ask The Fool Pure plays Q: What's a "pure play" company?
Ask The Fool
Q: What’s a “pure play” company?
A: Unlike conglomerates, a pure play is a company that focuses on one single business.
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When investors are drawn to an industry, they may look for a company that’s a pure play, so their invested dollars won’t be spread out over other, less-desirable businesses.
If your research suggests that the light-bulb industry is attractive and profitable, you might invest in General Electric, which makes everything from light bulbs to airplane engines, with each operation having varying profitability characteristics.
Or you might try to find a pure-play light-bulb company, which would be focused solely on making light bulbs.
Coca-Cola is a beverage pure play, unlike PepsiCo, which has a giant snack operation in Frito-Lay.
Barnes & Noble is a bookselling pure play, while Seattle-based Amazon.com sells books and much more.
The Motley Fool take
MasterCard going strong
Credit-card runner-up MasterCard (NYSE: MA) reported better-than-expected third-quarter earnings recently — impressive for a financial firm these days.
Revenue was up 24 percent over the year-ago quarter, and net income rose 7 percent.
Shares have been lopped in half over the past six months. But MasterCard is still growing at a pretty healthy clip: Purchase volume increased 13 percent to nearly half a trillion dollars, while total transactions grew 13 percent, to 5.4 billion.
As has been the case for a while, global growth led the way, with 25 percent purchase volume growth in the Asia/Pacific region, 25 percent growth in South Asia/Middle East/Africa and 19 percent growth in Latin America. Few complaints there.
U.S. purchase volume grew at a much more modest 7 percent … by far the slowest-growing segment.
Shares have recently been cheap enough to justify buying, but the near-term future is bound to be anything but easy.
A prolonged global recession could keep consumers suppressed and spending less.
If you have the guts to dip your toes in, you’d be well-advised to check your lofty expectations at the door, have a long-term time horizon and be prepared for an all-out fallout of the global consumer market over the next year or two.
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