Latest / Money Grows on Trees / #307 - If I Wanted to Survive the Recession, This Is What I'd Buy

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#307 - If I Wanted to Survive the Recession, This Is What I'd Buy · Money Grows on Trees

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  The recession is coming and I'm positioning our capital across three specific
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  sectors and industries to protect our wealth. Not
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  the speculative plays everyone's chasing, not the hype, not
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  the sectors that boom only during good times but collapse when
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  things get hard. These are the industries that actually work when
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  everything else crashes. They're durable. They have endurance. These
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  are the industries that generate income when the market falls apart. And
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  these are the industries that will protect you when inflation stays
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  high and unemployment starts to rise. I've spent years
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  helping people save tens of millions of dollars, and the one thing I've learned
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  is this. The people who survive recessions aren't
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  the ones who panic. They're the ones who position themselves
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  before it all happens. So, in this
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  video, I'm going to break down exactly which industries I'm
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  positioning capital in and why I'm doing that. Because
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  the window is closing very quickly. So,
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  I'm going to tell you exactly what I'm doing and
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  why I'm doing it. I'm Lloyd James Ross, seven-figure
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  investor and entrepreneur, and I've helped thousands of business owners and
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  professionals turn financial stress into success. If
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  you're stuck in old money habits, overwhelmed by investing, or unsure where
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  to start, this is for you. I'll give you the mindset and
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  strategies to take control, grow your wealth, and achieve financial
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  freedom. It's time to make your money work for you. The first sector
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  happens to be the healthcare sector. where demand doesn't
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  disappear. Healthcare isn't actually discretionary. people
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  don't just stop looking after themselves. They
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  don't stop getting sick, they don't stop filling their prescriptions, they
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  don't stop visiting hospitals, and they don't stop needing chronic
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  care. That makes this particular sector, healthcare, one
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  of the most recession-resilient sectors in
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  the economy. So here's why I'm buying it. One, inelastic demand.
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  The usage barely falls during recessions. An
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  aging population, right? It's increasing. So the demand's rising
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  off its baseline. Pricing power through insurance and government reimbursement.
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  So you can actually increase the price of these things without it
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  disturbing the demand. And of course, strong free cash flows, even
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  during economic slowdowns. So in downturns, healthcare
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  typically holds earnings protects
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  the dividends, and recovers faster than cyclical sectors.
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  So that makes it such a defensive sector. And
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  with that comes defensive compounding. So the growth in
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  capital over time, even in defensive sector, it's very, very, very
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  recession-proof, I should say. Now, does it come with its own risks? Of
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  course. It can still be susceptible to balance
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  sheet risk. If I'm buying stocks in this particular sector, balance sheet risk,
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  key man risk, management risk. It can certainly
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  go through different regulatory risks without a doubt. I mean, we've seen
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  that with the changes in Medicaid at the US level. So
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  it doesn't come without risk. It just means that during recessions, it's
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  super defensive. So will healthcare still be around in the next 10, 20, 30, 40, 50? Absolutely.
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  Will demand increase? Yes. Do people
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  stop doing it when there's a recession? No. That's why
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  I love it. All right. So that's the first sector. The second sector.
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  a business as old as time itself just about, this
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  is oil and gas. Oil and energy, I should say, the
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  energy sector. What makes it effective? Cash flow
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  and not just based on growth. Energy
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  is really misunderstood. By energy, I mean typically oil and gas, not
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  really in renewables or you could put it in there as well, but typically it's
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  oil and gas. People assume recessions
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  kill all demand. But it's more nuanced than that. There's more
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  to it. What actually matters when
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  you're investing in the oil sector, and I don't mean like buying the commodity. I
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  don't mean that at all. I'm not buying oil barrels themselves or
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  not buying oil as a commodity directly. I'm not
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  even buying futures or forwards contracts, anything like that. I'm buying
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  stocks in oil companies. And if you look at the way Warren Buffett positions
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  his capital to benefit from a particular type
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  of commodity, he will always buy the underlying business. Now specifically he
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  prefers oil because it's a very entrenched
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  unbeatable product. In fact, if you had to choose a product of all products, oil
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  is the product of all products. People think this is, and by all accounts, this
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  is a very good product. However, oil is needed to create that.
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  Oil is the essence of everything. That's why the US
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  just overtook Venezuela. If you don't think oil is important, why did they just overtake Venezuela?
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  Why did they go after Greenland? It's who gets the
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  most oil wins, because here's the thing. There's this really important
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  race to AGI happening. The AGI, artificial general
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  intelligence, is what the US is racing China to achieve. Right
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  now, China is leading the energy race. It's
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  building 36 nuclear power plants. Did you know that open
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  AI, just to generate one gigawatt of power, needs
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  to create a whole power plant that powers 900,000 houses? it
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  needs 36 of those to win. 36 power plants. China
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  is already doing that. So China's leading the power race because
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  these two countries are in a race to AGI. Sergi Brin
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  from Google, he came back out of retirement to join Google and
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  he said, I'm here. I think it was Sergi or Larry Page said, I'm here
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  and we're going to either go broke or get to AGI. That's how committed Google
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  is to getting AGI and they're on a pretty good path. So that's a US company. So
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  it's US versus China. Now guess what you need to
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  power AI. Guess what AI data centers need? You
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  guessed it, oil. The whole economy as
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  it grows faster and faster, the AI needs oil. Okay. Now
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  with oil, it's not about what separates good
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  oil businesses from others is the cost position.
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  Mean this, right? Those who can produce oil at the lowest
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  cost typically win, right? Energy is foundational. in
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  the sense that it's a very simple business model. You can pull oil
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  out of the ground at a certain cost and you can sell it through a distribution for a
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  certain cost and refine it for a certain cost. So it's very much a little bit
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  like the AI stack. You have to be fully integrated or you have to
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  be a specialist at your specific period of integration, right? I
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  know it's a bit of a mouthful, so stay with me. Just quickly, if you're ready to take control
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  of your finances but feel stuck on where to start, I have a
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  solution. My book, Money Buys Happiness, simplifies investing
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  and wealth building with practical steps to help you achieve financial peace.
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  Get your copy via the link in the show notes and let's get your money working for
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  you. Now back to the episode. So here's why I'm buying oil before
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  a recession. One, just stating this again, energy and
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  oil is foundational to the global economy. Fact. Supply is structurally
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  constrained after years of underinvestment. So what that means is this. The
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  cure for low oil prices is low oil prices. So
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  what I mean is when oil's low, now it's gone from $100 a barrel
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  in 2022 down to $57 to $60 a barrel today,
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  right? That's a huge fall in price per barrel. Now
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  when that happens, it doesn't make any sense for companies
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  to start drilling again, because drilling costs a lot of money. So unless oil's at $65 plus,
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  they're not going to drill for new oil. What that means is it structurally undersupplies
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  the oil market, because no one's drilling. And if you look at the data at the
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  minute, you see that there's less wells, less wells, less drilling, less drilling. Now,
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  with undersupply of drilling will come undersupply of oil. When that happens
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  and the demand's going up, it means there's not enough oil. If there's not
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  enough oil, price of oil is going to shoot. And Warren Buffett suggests and
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  says that it's not going to shoot to $100, it's going to shoot to $200 a barrel. So
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  we're going to see a massive Increase in the
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  price of oil we're gonna see huge cash flows for oil companies And
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  they're not spending any money at the moment drilling new wells because it's just not
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  the price of all is not high enough So you're gonna see a structural Constructually
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  constrained oil price and under investment, which
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  is going to increase the price of oil So there's a lot and there's low-cost producers
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  that generate cash even with low oil prices and that's where you live when you position
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  yourself in And energy companies prioritized certain energy
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  companies, these ones, that have got low cost, they're integrated, they
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  prioritize dividends and buybacks, okay? So they're not reckless with growth.
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  And if you can find that, this is one of the coolest, oldest
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  businesses ever to be part of, right? So in recessions, high
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  cost producers suffer, they go bankrupt, low cost producers consolidate, and
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  they actually buy some of those assets themselves. Cash rich operators buy
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  those assets cheaply. And over time, they start to compound that
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  capital over and over again. And I know some wonderful companies in
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  the sector that do that, right? But this is not really just a bet on oil prices exploding,
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  although that would help a lot. It's a bet on the survivability and
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  endurance and durability of shareholder returns. So
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  for the last almost two, I
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  would say 150 years since John D. Rockefeller really cornered the
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  oil market, oil companies have absolutely dominated.
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  He became the richest man in the world through oil. Oil
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  ain't going out of fashion. You need heavy crude, you need light crude, you
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  need gas, LNG comes from oil. You
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  need kerosene, you still need petrol. I mean, EVs are still developing, but you still
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  need oil to develop EV batteries and EV cars. I
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  can't begin to tell you how much oil is still needed in everything. From
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  this desk, this microphone, to my iPhone, you need
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  oil for feedstock, everything. You need oil to generate all the food in the world,
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  from all the diesel, from all the equipment. You need oil everywhere. Is
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  it the most important product in the world? Yes, it
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  is. And so I'm positioning our capital there in the right companies, big
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  majors, some Canadian players who have durable competitive
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  advantages to outlast even the cheapest oil price. So
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  they win when oil falls, and they win when oil rises, and
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  they win for the next hundred years. And that's why I'm
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  super excited to have our capital position in oil. Now, what's the third
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  sector? I'm so in love with this sector too. It's so good.
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  Railroads, the backbone of physical commerce, right? Railroads
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  don't trend on social media. Now, railroads
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  used to be a very poor investment, but it's consolidated. There's only a
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  few a handful of great class
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  one railroads that move goods across countries, right?
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  And so rail, you have to understand is the most efficient way
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  to move large bulk goods. It's impossible to
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  replicate, meaning you can't just go and lay 32,000 miles
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  of track there in the United States instantly, you can't do it. It would cost you
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  between 500 billion and a trillion dollars to do just that.
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  Yet you can buy some of these companies for a hundred billion. They're undervalued
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  against the infrastructure they already own and operate in, right? Plus, they're
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  protected by extreme barriers to entry on a regulatory basis.
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  So those three things make them durable, impenetrable, and
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  almost impossible to compete with, right? But why railroads shine
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  before and after recessions is because of this. They're monopoly-like. They're
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  monopoly-like, right? You can't
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  compete with them. They're also essential. They're essential for
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  the transport of food, energy, chemicals, and
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  industrial goods. Because
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  of those things, they've got amazing strong pricing power through long-term contracts.
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  They can increase the price of how they move things and it doesn't affect the
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  demand for them. Of course, they've got lower fuel cost per ton
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  mile than anything else like trucking. So during downturns,
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  the volumes of what they change may dip, but cash flow
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  is solid. The competitive position is impenetrable.
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  It actually strengthens during recessions. And railroads are
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  quiet compounders with fortress economics. and they
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  throw back cash to shareholders, right? They throw
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  back cash to shareholders during recessions, after recessions, got pricing power, they're
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  consolidating, you can't compete with them. It's unbelievable, which is why Warren
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  Buffett owns the largest railroad in America, BNSF
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  Railroads. And it's why I've positioned our capital across, which
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  can buy stocks in one of the USA's leading railroads. It
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  makes so much sense. I could pretty much bet the farm on just buying that railroad. It's
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  so good. Anyway, they're the three sectors.
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  But here's the common thread across those three sectors. These
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  assets share the same DNA, right? at
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  the core. What are they? Let's go off the top. One,
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  they're essential to daily life. Healthcare, oil, and railroads, essential.
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  Two, they're difficult to disrupt, which means you can't just
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  step in and compete with them. Regulatory, capital-wise, you
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  just can't. They're capital-intensive. They're difficult
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  to replace. and they're supported by long-term demand. The
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  demand for oil, the demand for moving goods, and the demand for healthcare is not
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  going away. It's absolutely increasing. They don't
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  rely on cheap money. They don't rely on hype. They don't
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  rely on exponential user growth. They just don't. They rely
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  on economic necessity. That's
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  why before any recession comes, not after, I'm
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  positioning our capital across those three specific sectors. So by
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  the time a recession arrives, you
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  know, prices have already moved. Quality assets are already harder to
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  accumulate. Fees are already at its peak. And you'll see a lot of capital move
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  into these sectors because they are unbreakable, right?
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  So buying before a downturn allows you to
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  do a few things. One, lock in the current yields. They're pretty solid
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  at the minute, the yields. Two, build positions gradually over time without
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  having to buy at full price. Avoid forced decisions
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  like panic selling in one sector to go to another, which is what will happen. And
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  of course, let the volatility work for you, not against you. So position your
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  capital at times when it's a little bit cheaper. And right now, you can still get into these sectors for
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  very reasonable prices. It's quite amazing. So positioning
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  Not market timing, it's the difference, okay? And into
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  areas and sectors you never have to sell. And that's why I'm
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  excited about these particular sectors. So, I'm not
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  rotating into highly leveraged growth stocks. I'm not rotating into businesses
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  dependent on cheap capital. I'm not rotating our capital into companies with weak balance
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  sheets. I'm not rotating the capital into stories that require perfect conditions
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  to survive, right? Well, like everyone else. Recessions
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  will expose financial weakness. It will happen. And it
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  happens faster than any analyst could ever anticipate. And I've seen it happen before.
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  So I'm positioning before then, and I'm positioning for a 100-year portfolio. And
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  I'm super pumped about that. Do I still hone tech? Absolutely, in
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  certain areas. I've done an episode on China tech. I think that's big. It's going to grow. But
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  the big takeaway is this. Recessions reward cashflow, balance
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  sheet strength, and essential services. And what you want to do is position for durability. What
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  I love about this is I don't have to sell any of the healthcare. I never have to sell any oil
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  stocks. I never have to sell the railroad. I never have to make sell decisions.
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  It's just set and forget forever. And they outperformed the
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  S&P 500 historically, right? So it's not
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  a promise of overnight riches. It's not sexy at all. It's
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  very much Unsexy, but that's what I love about it. It's
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  durable There's income and there's long-term compounding all
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  the three best things to do to get wealthy and when
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  the next recession hits Those traits matter more than
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  narratives. Okay, so here's a bit of a final thought You
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  don't build wealth by predicting headlines You
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  build wealth by growing assets that still function when the economy
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  doesn't Thanks for listening to Money Grows on Trees. If you enjoyed the
• 15:32
  episode, leave a five-star review on Apple Podcasts and Spotify and
• 15:36
  subscribe to us on YouTube so you never miss an episode. And
• 15:39
  if you're serious about building wealth, make sure to check out the links in the show
• 15:42
  notes and follow me on all social media platforms at