Pick-And-Shovel Play

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Play

    A slang term that describes the positive aspects of an investment ...
  2. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  3. Pure Play

    A publicly traded company that is focused on only one industry ...
  4. Speculation

    The act of trading in an asset, or conducting a financial transaction, ...
  5. Speculator

    A person who trades derivatives, commodities, bonds, equities ...
  6. Investment Strategy

    An investor's plan of attack to guide their investment decisions ...
Related Articles
  1. Active Trading Fundamentals

    Understanding Investor Behavior

    Discover how some strange human tendencies can play out in the market, posing the question: are we really rational?
  2. Forex Education

    Play Foreign Currencies Against The U.S. Dollar And Win

    Don't panic when the dollar drops. Learn to exploit the greenback's decline and profit from it.
  3. Forex Education

    Playing The Gap

    Learn how you can earn money by analyzing the disruptions in normal price patterns.
  4. Options & Futures

    Fee-Based Research: The Good, The Bad And The Ugly

    Providing information on stocks that would otherwise not be available, fee-based research plays an important but complicated role in the market.
  5. Economics

    Playing Investment Defense

    Learn how to protect yourself from the potential risks that can impact a company's share price - and your investments.
  6. Investing

    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 that correlates highly to the performance of the stock's particular ...
  7. Trading Strategies

    What does a double bottom tell a trader about the overall trend?

    Learn how a double bottom pattern forms on a price chart and why many traders consider double bottoms to be a sign of reversal in the price trend.
  8. Technical Indicators

    What are common trading strategies used when identifying a double bottom

    Use simple, low-risk trading strategies to take advantage of a double bottom formation. Traders typically take one of these approaches to buying the market.
  9. Technical Indicators

    What is a common price target when identifying a double bottom?

    Learn how to identify a double bottom stock pattern and where to set a target selling price point to get the most out of your investment.
  10. Trading Strategies

    Why is divergence between indicators important for traders?

    Learn what technical analysts mean by a "divergence" between indicators, and determine why a divergence could be a sign the current price trend is ending.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center