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. Speculation

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

    A person who trades derivatives, commodities, bonds, equities ...
  4. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  5. Investment Strategy

    An investor's plan of attack to guide their investment decisions ...
  6. Pure Play

    A publicly traded company that is focused on only one industry ...
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. Can an investor use leveraged ETFs to invest in the airline sector?

    As of 2015, there are no leveraged exchange-traded funds (ETFs) available to track the airline industry within the transportation ... Read Full Answer >>
  3. Why would a growth investor purchase shares of companies in the drug sector?

    The drug sector – particularly its newer, more high-tech biotechnology segment – offers stronger returns than the broader ... Read Full Answer >>
  4. What is a good annual return for a mutual fund?

    A "good" annual return on a mutual fund can only be gauged in a relative sense, influenced primarily by the investment goals ... Read Full Answer >>
  5. What is the difference between a green field and a brown field investment?

    Green-field and brown-field investments are two different types of foreign direct investment, or FDI. Green-field investments ... Read Full Answer >>
  6. What is Z-spread and option adjusted credit spread?

    A zero-volatility spread, or Z-spread, uses the zero-coupon rate curve to calculate the spread between assets of different ... Read Full Answer >>
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

    Top Alternatives to Penny Stocks

    Have the stomach for high risk? Consider these alternatives to penny stocks.
  7. Mutual Funds & ETFs

    Should You Bet on These 5 Inverse Oil ETFs?

    While these oil inverse ETFs can make a lot of fast money, investors need to proceed with caution.
  8. Economics

    What are Pork-Barrel Politics?

    Pork-barrel politics is a form of patronage whereby politicians favor their constituents in exchange for benefits such as campaign donations and votes.
  9. Investing Basics

    What is the Rule of 70?

    The rule of 70 is an easy way to calculate how many years it will take for an investment to double in size.
  10. Investing

    How To Track Upcoming IPOs

    Interested in investing through IPOs? Here is the list of free sources for information on upcoming IPOs.

You May Also Like

Hot Definitions
  1. Standard Error

    The standard deviation of the sampling distribution of a statistic. Standard error is a statistical term that measures the ...
  2. Capital Stock

    The common and preferred stock a company is authorized to issue, according to their corporate charter. Capital stock represents ...
  3. Unearned Revenue

    When an individual or company receives money for a service or product that has yet to be fulfilled. Unearned revenue can ...
  4. Trailing Twelve Months - TTM

    The timeframe of the past 12 months used for reporting financial figures. A company's trailing 12 months is a representation ...
  5. Subordinated Debt

    A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known ...
  6. International Financial Reporting Standards - IFRS

    A set of international accounting standards stating how particular types of transactions and other events should be reported ...
Trading Center