Compared to a pure play, a diversified company will be better positioned to handle underperformance in a given category because it has other sources of business. But individual successes can also be negated by other areas of the business.
Even if a diversified company succeeds in a particular category you want to invest in, its overall business and stock results might still be underwhelming due to its performance in other categories.
An example of a pure play versus a diversified company
Take-Two Interactive (TTWO +0.66%) is one of the largest and most influential pure-play companies in the video game industry. The company was founded in 1993 and is best known for hit series like Grand Theft Auto, Red Dead Redemption, and NBA 2K. Throughout its history of operation, the business has remained intensely focused on developing and publishing video games.
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