During the 2008/2009 recession, discounters such as Dollar General posted strong sales comps. We studied several discount retail concepts this summer and determined that BJ's presents the best long-term opportunity. The wholesale club model creates a sticky and differentiated customer experience because of the membership dynamics. Wholesale clubs build strong brand loyalty and have pricing power in their membership fees. Membership fee income is pure profit and provides a powerful business lever for long-term earnings growth. Investors appreciate the quality of the wholesale club model and have awarded Costco a 32x price-to-earnings multiple. Despite BJ's being a 'Costco clone', its stock only trades for 17.5x earnings – a near 50% discount(!). Finally, with just 226 store units compared to Costco's 847 units, BJ's has a significant opportunity to grow its store base and is currently accelerating new unit openings.