Let's say we met a friend at the mall this past weekend to explore the racks for seasonal sales. Afterward, we saluted each other over a martini and a bit of broccoli quiche. Then we went home, took a shower, brushed our teeth, downed our prescription medicine, and cuddled up under that flannel blanket and quilt we bought last year at an online store. As we relaxed, we read a book with pages lit by a 75-watt soft light bulb.

That day we surrounded ourselves with - and used - non-durable consumer goods. The items in this sector could be described as those items we purchase with limited lifespans. This includes clothing, shoes, other textiles, pharmaceuticals and chemicals, food, beverages, reading material, and tobacco products. Once again we'll experience an overlap of items among various sectors. Pharmaceuticals are one example, as they can also be listed in the medical and health care sector.

The chemicals were a mystery until I cleaned my kitchen the other day. I then realized the chemicals listed in this sector would be those used in household cleaning. Just look under your sink for your preferred household chemical solutions and their manufacturers.

Foods and beverages also overlap into their own food and beverage sector. What we need to do in the case of overlapping products is look at how the actual company lists themselves in market sectors. This is for portfolio diversification purposes. If we have a penchant for Yummy Donuts, we might notice that Yummy is listed in the food and beverage sector. For diversification purposes, we might avoid other food products in other sectors.

Non-durable consumer goods might seem confusing on the front end. Many companies producing non-durable consumer goods could be widely diversified conglomerates. The company that sells our favorite Yummy donuts might also produce tobacco products and/or alcohol. If we have a problem with supporting any of these products (including the donuts), then we may have to forgo supporting that company in our portfolio.

We can't tackle non-durable consumer goods without recognizing sluggish retail sales during this past holiday season. This brings us to the larger picture, where economics and politics play a part in how this sector responds. When jobs are threatened or lost, people don't run out to purchase goods they can live without. However, if we think about what we can't live without, then we have clues to how to invest in non-durables.

Every day most people brush their teeth, wash their hands with soap, and take showers with shampoo. Not everyone conditions their hair, and I know some men that wash their hair with soap. Go figure. We also use dishwashing detergent, but many people don't have dishwashers. We all have to eat to survive, but not everyone eats caviar. Everyone also needs water, but not everyone drinks the bottled variety.

If you're following me, then we understand the easiest way to invest in non-durable consumer goods is to focus on absolute necessities for a majority of consumers in any market area. Beyond this, the next focus would be non-durables with a large market reach. This is tricky, as we have to guess how many folks are willing to forgo certain items to have other items they consider necessities. For example, some people would never drink water out of their faucets, even if the faucet has a water filter. Of course, these same people may experience a loss in income, forcing them to change their habits. If forced into a choice, would they purchase a water filter and fill up used water bottles, or would they sacrifice other items to keep themselves stocked in bottled water?

Many Americans don't like going without 'perks'. We often make sacrifices in our budgets so we can own the feeling of being pampered by material goods. This behavior includes wearing that new pair of shoes at 50% off, sipping that cup of latte with friends, and - my favorite pick-me-up - chocolates, preferably in private. These little non-durables are all purchased with "discretionary income." This income is usually privy to employed individuals, people who can cut from another area of their budget for impulse items. But our need for material goods goes deep, and each individual has their own material "feel good" item, no matter the cost.

Companies rely on this consumer mentality, and they understand our almost unconscious desire for impulse purchases. The next time we stand in line at the store, take a look at the products on racks next to the register. Make notes on the companies that manufacture these items. Ask the store manager about his reasoning for these item placements. Are they slow-moving items that need special attention, or do suppliers pay extra for special placement? If we're considerate of the manager's time, they might expound on their sales strategies, providing us with further insight into retail management of non-durable goods.

If we understand how business operates, we know the bottom line in non-durable goods - or any other item - depends on expenditures. This need to keep operating costs low often spurs a company to expand into their own manufacturing processes. Look for companies manufacturing or packaging their own goods, and who keep borrowing at a minimum in these expansion ventures.

The other clue to watching companies in this sector is in acquisitions. If our favorite company is gobbling up other businesses like pac-man, find out why. Perhaps their acquisitions mean a lower manufacturing cost or a means to higher sales volume. If our company sells a branch or a firm under its control, check the news and financials to see if the sale is conducive to the bottom line. When companies buy and sell subsidiaries like there's no tomorrow, watch out for equally volatile equities. Many investors react to each purchase and sale with their own portfolio strategies.

Once we begin to dig under our sinks and into our closets and cabinets, we'll get an idea of the companies we support with our money on a short-term basis. Once we have our list, study them for possible long-term investments.

Next week we'll look at other perks we give ourselves through entertainment. Yes, this might mean jelly donuts; but it also includes movies, amusement parks, and any other means we might use to avoid the news.

Until then,
Linda Goin