Pick-And-Shovel Play

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DEFINITION of 'Pick-And-Shovel Play'

A strategy where investments are made in companies that are providers of necessary equipment for an industry, rather than in the industry's end product. A pick-and-shovel play, in practice, could be within the oil industry; an investor would purchase stock in a company that manufactures seismic data equipment that exploration and production (E&P) companies need to find new oil and gas deposits, rather than on the E&P company itself.

BREAKING DOWN 'Pick-And-Shovel Play'

The expression may have been derived from the California gold rush, where many of those who profited did so by providing the miners with picks, shovels and other equipment needed for gold mining. The idea behind pick-and-shovel plays is that, in the case of E&Ps, for example, it doesn't matter if the E&P Company finds oil and gas or not, they will need to purchase specialized equipment either way.

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RELATED FAQS
  1. What is a pure play?

    A pure play is a company that invests its resources in only one line of business. As such, this type of stock has a performance ... Read Full Answer >>
  2. Do penny stocks pay dividends?

    Because of the small market capitalization and revenues typical of most penny stocks, there are very few that offer dividends. ... Read Full Answer >>
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    It is possible to trade penny stocks through an individual retirement accounts, or IRA. However, penny stocks are generally ... Read Full Answer >>
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