A Gambler or A Business Owner
In the last three days, the Dow Jones Industrial Average sold off more than 800 points twice. Inflation is running above 8% and the Federal Reserve is aggressively raising rates to calm inflation.
Additionally, Russia is not backing down their attacks on Ukraine while China is struggling with COVID as if it was March of 2020.
The Dow is now down 10% this year, while the S&P 500 is off 13%. The Nasdaq is down more than 20% for the year.
Is this a reason to panic and what should you gain your attention?
The same day the market dropped 800 points Microsoft posted record earnings with revenue growth of 18%. Alphabet’s revenue came in at $68 billion, up 23% from the same period last year. And Visa posted earnings of more than 20%.
Despite this stellar growth, Microsoft and Alphabet were down nearly 4% on the day while Visa was down more than 4%.
Ask a fundamental business question. If you owned all of Microsoft, Alphabet, or Visa would you run for the door, or, would you be pleased with the growth and results?
Hopefully, you’d be all smiles. Unfortunately, since these are publicly traded businesses it distracts people from the issues that truly matter. As you think about this, ask yourself, are you a gambler or a business owner?
As you make your evaluation, consider that HEB, Discount Tire and Buc-ee’s are all well-known brands. They are very popular with strong revenues and earnings. This is what gives them, or any business, value.
However, HEB, Discount Tire and Buc-ee’s are all privately held. No one obsessed over their “ticker” today. No one tried to day-trade these businesses. Regardless of Fed policy, China lock-downs, or the latest inflation data….the owners of these businesses have a laser focus on business fundamentals, and nothing else.
No matter what happens in the world, HEB will be the go-to place for groceries. For 115 years it has been the same formula. With revenue of more than $31 billion, HEB is the 9th largest private company in the US according to Forbes.
Discount Tire is the world’s largest independent tire and wheel retailer. After 62 years, they focus on reasonable prices, customer satisfaction and a satisfaction guarantee. No matter how busy they are, they always have time to patch a flat for free.
And at the Buc-ee’s you can fill up your car at one of dozens of gas pumps. Buc-ee’s in New Braunfels is the world’s largest convenience store at 68,000 square feet. Over the last 42 years, Buc-ee’s has been known for their clever marketing and billboards. “The Top Two Reasons to Stop at Buc-ee’s: Number 1 and Number 2.”
These private businesses have carefully navigated the entrepreneurial landscape for decades, if not centuries. And there is an important lesson in these private businesses for all investors.
I have no skill as a gambler. While the odds favor the house in Vegas, the gambling odds favor Wall Street even more. You will not out-trade the market.
I have no idea what will happen next week or next month. The next year is completely murky. However, I don’t care as I don’t have to play that game. Don’t gamble. Focus on being a business owner. Own great businesses that consistently get better each year.
Being a business owner completely changes the investing dynamic. Time frames are completely open-ended. Focus on where you want to be over decades. Being a patient business owner over long time frames allows you to build wealth while keeping your tax bill to a minimum.
Even if you are of traditional retirement age, you have decades to manage money. Being a business owner allows one to maintain purchasing power over the remainder of your life.
The one main difference highlighted in these businesses is the public trading aspect. Being publicly traded does not add value; it delivers distraction. Turn off the news, it is not there to inform you.
Know the game you play and the time frame over which you expect to achieve success. The longer, the better. The individual can win the long game.
Own businesses so good you’ll never want to part with them.
Focus on why a business has value: its brand, its people, sales and earnings. Stop asking about the latest ticker quote. Instead, be informed about sales, earnings and margins. These are the things that matter to the successful investor.