Owning companies is a powerful strategy for wealth accumulation, offering opportunities beyond traditional investments.
In this week’s episode of Retire in Texas, Darryl Lyons, CEO and co-founder of PAX Financial Group, explores the concept of investing as a means to own businesses, emphasizing how this approach can generate long-term financial growth.
Show highlights include:
*Exploring why owning a business is considered the best way to accumulate wealth, supported by evidence and examples.
*Differentiating between passive and active real estate ownership, and their impacts on wealth-building.
*Understanding the connection between investing in stocks and owning companies, highlighting the tangible benefits.
*Real-world examples of innovative companies, such as Align Technology and Fortinet, and their contributions to the investment landscape.
*Examining the potential of companies like Garmin in the fitness industry, especially with the rise of obesity drugs and health trends.
If you enjoyed today’s episode, make sure to leave a comment and share the show with a friend!
Transcript:
Hey, this is Darryl Lyons, CEO and co-founder of PAX Financial Group and you’re listening to Retire in Texas. Remember, this information is general in nature. It’s not intended to provide investment, specific investment, tax or legal advice. Visit Paxfinancialgroup.com for more information.
So, what’s the best way to accumulate wealth? I’m sure that you’ve thought of this question over the years. What’s the best way to accumulate wealth? Some may say the lottery. Actually, there’s probably a demographic group out there that sincerely believes that. Some may say gold. Many people would say real estate. And I would suggest to you, with evidence to support it, that the best way to accumulate wealth is by owning a business. Or none. Then you might say, well, real estate.
If you are passive in real estate, if you’re passively owning real estate, it’s different than actively owning real estate. If you actively own real estate, you don’t own real estate. You’re in the real estate business. But I’ll digress. Owning a business is bar none the best way to build wealth. But if you didn’t start or inherit a business, that’s okay, because the capital markets give you an opportunity to own a business.
The problem is we oftentimes lose that perspective because our investments and the companies that we own are tucked into a structure that can be confusing and that could be a mutual fund, an exchange traded fund. Oftentimes, you hear me use the word strategies or portfolios, and it begins to feel, this is just feel, nebulous and almost as though the odds are stacked against you, when in fact historically, the odds are in your favor.
But let me remind you that investing is the very essence of it, is in fact, owning companies. We often say buy stocks, but buying stocks is synonymous with owning companies. It just often gets lost in translation along the way. So let me remind you of examples or through examples. Let me remind you through examples of owning companies. I pulled out some companies from one of our portfolios that we use, that screens through our biblical, responsible and best investment screening methodology.
And I pulled out four samples and these are not companies I am recommending. So, if you go out and place trades on these particular companies, that’s on you, not on me, because you have to consider trend analysis, fundamental analysis and prices of these securities before you purchase on your own. But, generally speaking, I want you to know how this whole game of investing works, and it’s hard to understand when you get disconnected from owning these companies.
So, I’m going to give you four examples. This one, this example of this company is an example of just a company doing cool things and inventing cool stuff. In the investment world and business world, we call that innovation. Innovation. But that’s just a long word for saying this company is doing really cool things and this company’s called Align Technology.
They make Invisalign. Now, some of y’all might remember I used to have braces as an adult and I mean, eating salads was problematic, obviously and when they broke, that was no fun because they’d poke your cheek. I could not get Invisalign. It did not work for solving my problem, but as I understand it, it works for a lot of people.
And last time I checked, almost everyone in the world has teeth. Almost. And so, this market is absolutely huge and Joe Hogan, the CEO, said that they want to grow their business 20% to 30% a year. They’re going after this marketplace aggressively. They will continue as an organization to think deeply about increasing sales, reducing costs, innovating. They even came up with this thing called a Smile Tool.
Where you can go online. It’s an app. I’ve never used it, but you can see what your smile would look like before and after Invisalign. Take a selfie. One with crooked teeth and then the next one with not crooked teeth. It’s kind of cool. They also just recently did this acquisition of a company called Cubicure and this company is a 3D printing company.
It’s got patented hot lithography technology and this technology, produces really tough and temperature resistant polymers. So, think of it this way. Like, imagine you sketching out something in general, like you sketch out a part for your plumbing system or your sprinkler system, and you sketch it out. They’ll take that, they’ll upload it to their computer imaging, and then in a few days later, well, they put this computer image into, they put the information into this big oven looking thing and then a few days later, they produce using 3D printing this custom part for your sprinkler.
I mean, this technology is absolutely insane what they can do. It’s like this big, huge Cubicure oven. And so, they’re doing this with Invisalign to improve the technology, improve the client experience, speed and efficiencies and product, character the substance of it making it stronger because these things do break.
This is just a company that’s thinking deeply about this vast marketplace, not only in the U.S., but globally and finding ways to innovate and those are just a couple examples. So, let’s go to the next one, Fortinet. Now the bad guys are not going away. I mean, think about it. If you remember some of the episodes I’ve done before, ID theft is prevalent.
I mean, this is coming at us every single which way and we think about it as individuals all the time. Alerts on our bank account, we see it, we know it exists, but for businesses it’s I mean, it’s not only challenging, but it’s expensive. There was a meat supplier, JBS, that was a victim of a ransomware attack, and they had to pay $11 million in bitcoins to the hackers.
There was a pipeline. Colonial pipeline had a ransomware attack, had to pay $4.4 million in Bitcoin to hackers. I mean, this stuff is killing our businesses, and we need cyber security and we’ve got to pay a ton. Even PAX does a ton and I mean, it’s a big budget item. Now you just have to do it.
Whether these adversaries are domestic or foreign or rogue mobster groups, when the company gets hit, there’s financial losses, there’s loss of productivity, there’s reputation damage, all kinds of problems. And so, you need a cyber security company like Fortinet and that’s, by the way, Fortinet. So, there’s an “I” in there, but it’s Fortinet. But you need a company that’s thinking deeply about how to get in front of these bad guys through data protection, network design, vaulting, training, detection like breach notification, even thinking about every industry’s laws and regulations, crisis management.
What do we do if something happens? Penetration testing. Hey, let’s just hack in, see if we can hack in. I mean, you need good guys out there that know this stuff and Fortinet is one of those companies. They started in 2000. They have over 13,000 employees worldwide. And if you think cyber security is going to continue to be a threat for years to come, then you’re going to want to be an owner of a company like Fortinet, where, I mean, the founder and CEO is a Stanford guy, highly regarded cybersecurity expert still running the company as a CEO.
And so, if your thesis is, bad guys are still going to be around you’re going to want to own a company that’s coming up with solutions to protect the good guys. Example number three. So, health care is continuing to be a trend. I mean, I guess this will never end but we all want to be healthier.
But the big, big, big trend and you probably have started to hear a lot, a lot about this is these obesity drugs and, their GLP-1 drugs. That’s oftentimes how they’re referenced. They’re considered miracle drugs. You can have about a 15% to 20% decline in weight as a result of taking these drugs. Certainly, there are side effects.
Certainly, there’s indirect consequences, but one of the things that we’re hearing a lot of is that in order to keep the weight off after you take these drugs, you have to exercise. I mean, I’m stating the obvious here, but if this is the case, then you start to think, okay, well, what about the fitness industry? Is there any play there that I can own a company in the fitness industry that might actually have more potential clients to buy their products, and one of them that you might consider, again, I shouldn’t say you might consider, if you’re an owner, what I’m trying to do is not like pitch stocks, because that’s the last thing I want to do.
What I’m trying to do is give you examples of companies that we’ve used, but one of them is Garmin. Garmin. You know, the Garmin is the GPS. They’re often known as the GPS, manufacturer. But the cool thing about them is, I mean, it’s the wireless technology, so you don’t necessarily have to rely on a cell phone tower.
So, if you’re a boater or a pilot or, hiker or fisherman, you can get information that you need to make better decisions. Right. And it also does a lot of fitness tracking. But this company is, again, a company that has smart people. That’s thinking deeply about, okay, if there’s a trend to get healthier, how do we tap into that?
And you think this company is just going to kind of casually think about it? No, they’re going to think about it very, very deeply. There’s 14,000 people that workout in this company. Sixty-five offices worldwide. They’re going to be all over the weight loss industry and in fact, the guy that still owns it, or co-founded it, Dr. Min Kao, he’s still the executive chairman.
He has his master’s and PhD in electrical engineering. He was involved in research for NASA in the US Army and, so this company is one that I think that if you own this company, you may be tapping into a potential trend and now it’s peripheral to the primary trend, which is these obesity drugs.
But some of these peripheral ones will ride the wave so to speak. Okay. Fourth one. Now, the thesis here is that India will continue to grow and those that don’t know India is really going to be the biggest, I think it actually is already, the most populous country in the entire world and their middle class is growing.
And I’ve said this before, but what happens when a middle class emerges, they’re done with dinner, they actually have a nice dinner, and they’re like I want some ice cream. So they go to the refrigerator, get some ice cream. Now here’s what happens. That helps the ice cream industry in India, right, but it helps the refrigeration industry in India.
It helps with the distribution of the ice cream, and it helps manufacturers across the country all through the supply chain. So, they’re having a huge population boom specifically though, in the middle class and one of the things that happens when you join this middle class is you start to get vehicles, transportation. And there’s a company called BorgWarner.
They’re out of Detroit. They have 40,000 employees. They make transportation parts, and that could be anything from a little electric motorcycle to kind of zip around these major cities to actual cars. It could be electric, it could be hybrid, it could be the traditional combustion, but BorgWarner out of Detroit, the 40,000 employees, they make these parts.
And so, if you think that there’s this middle class in India that’s going to participate in the automotive boom over the next ten years, and you want to participate that and you’re like, I don’t know about, you know, owning Tesla, I don’t know about owning Ford. BorgWarner is like, hey, we’re in the background, we don’t need everyone to know us, but we’re making the parts for all these, automobiles and, not just automobiles, but transportation across the world.
So, if you think about, like when it comes to investing and you think about it through the lens of owning these four companies. Think about like, these are companies that are innovating. They’re the good guys fighting against the bad guys. They’re thinking about health trends. They’re tapping into this growing middle class across the world.
And the best way, the best way. I challenge you to find data that’s contradictory to my claim, but the best way to accumulate wealth is by owning a company and I’m very, very pleased to participate in this capital markets where people who like me, didn’t grow up with money, can invest in this and have a piece of ownership and participate in these ongoing trends with very smart people who are passionate about what they’re working on.
And oh, by the way, I also say, let’s not forget, they’re very much incentivized to grow. Let’s not forget that. All the CEOs that I mentioned, their stock options and their incentive plans are specifically aligned with your best interests. Now, of course, it’s not perfect, but if you expect perfection, it’s politic. But generally speaking, this thing’s working really well because incentives are in place for these executives to grow the companies.
I just want to be a part of that, and I hope you do too. So, I hope that helps put things in perspective. This is not about investing in this nebulous world of Wall Street, where the odds are stacked against you. This is simply owning good companies over an extended period of time and be able to participate in their growth in such a way.
You get to accumulate wealth for the benefit, not just for the rich to get richer, but for to do things that God has called you to do. Hope that helps. I’ll do more of these if you think they’re good. If you want to hear more about some of the companies, please let me know. Ping me. I’ll do some more series on this.
I’ve got tons of companies to cover and happy to do this any time. Thank you again for tuning in and as always, you think different when you think long term. Have a great day.
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