A pure play is an investors' term for a publicly traded company that focus its resources on only one line of business. As such, the performance of its stock correlates highly to the performance of its particular industry or sector.
Many electronic retailers or "e-tailers" are pure plays. All they do is sell one particular type of product over the internet. Therefore, if interest in that product (or in buying it digitally) declines even slightly, these companies are negatively affected.
Pure plays can be contrasted with stocks of companies that have diverse lines of business and diverse sources of revenue. Tyco International is a large conglomerate involved in a variety of industries, from home security to plastics and adhesives. Because of this diversity within its product line, Tyco's stock performance, unlike that of a pure play, is not affected by one or two concentrated factors, but by many different variables.
But pure plays can be large corporations too. For example, Dunkin' Brands Group, Inc. (DNKN) (which owns the Dunkin' Donuts coffee shops) and Starbucks Corporation (SBUX) represent pretty pure plays in coffee. An investor or trader wanting to get in on rising prices of this caffeinated commodity would probably target them. In contrast, The J. M. Smucker Company (SJM) would not be a pure play, because—even though it owns major java brands like Folger's and Medaglia D'Oro—it also owns (and perhaps is primarily associated with) jellies, jams, and other comestibles. It's more of a food play than a coffee play.
Along with conditions affecting business, the performance of a pure play may also be highly affected by the type of investing style that targets it. For example, if a pure play's line of business is favored by growth investors, the company will do well during a bull market, when growth stocks tend to outperform the market. Conversely, during bear markets, when a value investing strategy is historically more profitable, a pure play associated with growth investing will do poorly.
Due to their dependence on one sector of the economy, one product or one investing strategy, pure plays are often accompanied by higher risk. They represent the opposite of diversified. On the other hand, this higher risk brings the potential for higher rewards because, when conditions are in their favor, pure play stocks can flourish—their performance undiluted by any other business activities.