Costco is a stock he wants to own in a recession: member fees give recurring revenue and loyal customers, and shoppers shift to value in a collapse, so stable growth and member loyalty should hold through any economic cycle even if it slows. Near 50 times earnings, he'd buy at 15-20 times earnings on a drop.

Okay, let's move on to number three. Once again, another stock I have never owned, but would like to own in a recession. The place that everyone seems to go to for their wholesale goods is Costco.

And sausages too, right ? Yes. Sausages. This is a stock I've always wanted to own, and I don't know what could possibly make it fall further than the market.

Look at Costco, the growing defense company. As you know, members pay annual fees for those low prices, creating recurring revenue and loyal customers. You've paid the fees, which is a sunk cost, so you keep going back there even if your overall spending decreases .

In the event of a collapse, shoppers tend to shift towards value, and this represents their strength. Again, if you have already paid the membership fees, and if you need to tighten your belt, why not go where lower prices are available?

The bet here is that stable growth and member loyalty will hold up through any economic cycle . Even if they experience a decline in their growth, you don't usually see people saying, "I'm less interested in the value they provide during a recession."

The stock rarely looks cheap. It never looks cheap. So, it might take a real crash for Costco to look attractive, but those who overlooked the price and bought what looked like an overpriced stock in the past have had very good results on that investment.

If I see the stock price drop, I think I will react quickly and buy more immediately.

Yes, this is another stock where the expansion of multiples has seen a remarkable change over the past decade or so. Here you can see revenue growth of approximately 10% on a compound annual basis.

Their operating profit rose by a slightly larger percentage than that.

I've always made videos about their profitability compared to membership subscription revenue, because their way of working allows them to think in a completely different way, where they can simply say, "You know what?"

"Our profit, our net income , is what we get from membership fees." Everything else can be run at a break-even point. While every other retailer has to think about it the other way around .

How much do we need to sell to reach the break-even point? This gives you completely different incentives, especially if you don't have to provide 15 different types of peanut butter , and all those varieties that other companies provide.

So, that 's why their prices are low. They simply have a fundamentally different business model.

But the market paid a heavy price for that. This is not a company that has achieved compound growth of more than 10%. This does not mean that it was not a great investment , but as I said, if we get it not at 50 times the earnings, which is the price at which the stock is currently trading, but at 15 or 20 times the earnings, then I agree, sign me up .