There Is No Denying That We Are Going Through An Awful Time

I have written several rough articles recently but I do feel it's important to put my opinions on the line in the hopes of helping people navigate the very rough waters we are in. That being said, I am a believer that our economic and investing way of life will not only survive but will thrive.

Nobody knows when the tide will turn, and I'm pretty sure that everyone wants to get back to some semblance of normal. With this in mind I would like to list my opinions of what I might consider placing on my shopping list. And I hope you, the Seeking Alpha community, can offer your selections. Today is not the time to jump in yet, in my opinion, but I think I'm seeing a slowdown in massive panic selling of late. To me, that is at least one positive to take note of!

Data by YCharts

As you can tell, the precipitous drops in the Dow (DJI) of 1000-3000 points has leveled off and we've had a few relief rallies. That is not to suggest that we have reached a bottom. To the contrary, we probably will be headed lower as the unemployment numbers keep surging and the number of business closings continue to climb.

However I do see a temporary drop off in the sharp declines, or "sell everything" numbers to at the very least a more manageable slow decline, even though there is high daily volatility. If you tune in to to any financial TV stations, you know the last 45 minutes of a given session have been the most volatile, probably from the day traders closing their positions for the day. I would guess that many day traders have lost chunks of money, while only a few have done well. That is not a knock or anything; it's just what I can see in these tiny "tea leaves".

If I envision a tiny sliver of a silver lining, it just might mean that our medical efforts are beginning to work and social distancing is making Wall Street a tad more comfortable. Perhaps not comfortable enough to start jumping in, but maybe a bit more energized not to dump shares and to begin selecting stocks for a shopping list as more positive signs show themselves.

Let me be very clear here. I am not advocating that folks nearing or in retirement start gobbling up shares, because there are still so many unanswerable questions. If you are fortunate to have a long time horizon (which I do not, by the way) then you might want to slowly consider the stocks you truly feel can make it through this collapse and can continue paying dividends, and hopefully even increase them. There will be some winners amidst a tidal wave of losers, so deep research and digging into fundamentals is imperative.

I would say that if you have a minimum of seven to 10 years prior to needing your income stream, there are a few companies that I have been looking at that you might want to consider putting on your own shopping list.

Seventy percent of our economy is consumer driven. Of that, many professionals say that about 30% of your overall budget might be earmarked for discretionary spending, so I will use that percentage as a small guide as I try to explain myself.

If 40% to 50% of your spending is non-discretionary, what would be a short list of those expenses?

First let me defer to this article to take a peek at what discretionary spending actually is:

A discretionary expense is a cost that a business or household can get by without, if necessary. These expenses are often defined as things that are "wants" rather than "needs."

KEY TAKEAWAYS

A discretionary expense is a cost that is not essential for the operation of a home or a business.

In a corporate environment, discretionary expenses are usually costs linked with improving a companys standing with its customers and employees.

Tracking discretionary expenses enables businesses and households to identify where they can save money in times of financial difficulties.

Discretionary expenses vary, depending on the business or person.

I believe this is a clear description of discretionary spending and here are a few non-discretionary expenses, as noted here:

Living Expenses

Day-to-day living expenses, including:

Debt

Any loans or credit youve taken out that youll need to continue to pay down the principal balance with periodic interest payments, including:

Taxes

Taxes fluctuate as you age as they shift from salaried income to capital-gains rates. Its important to have money set aside for annual taxes.

Insurance and Health Care

Health care costs tend to rise faster than inflation and can be a big expense as you age. Youll need to account for the following:

Quite obviously, reducing discretionary spending could help in everyone's belt tightening efforts. Reducing non-discretionary probably will probably take a few phone calls with banks, lenders, credit card companies, mortgages, and anything else you can think of.

All of this being said, I believe that companies that supply and produce "essentials" could see a short-term growth spurt and are likely to survive this collapse. Here are just three that I happen to feel somewhat comfortable with:

Data by YCharts

Procter & Gamble (PG) is a company that has the widest assortment of products that are actually "needed" by just about every age group - from baby food to adult diapers, I would guess - and this company is already well positioned during this crisis.

Coca-Cola (KO) has a vast assortment of food and drink stuffs that can be stored for long periods of time while we employ our self quarantines. KO has some comfort snacks that while they might not be totally essential, I believe many of us will still continue to purchase their products. On a personal note, I "need" an occasional snack while I am in self-imposed exile!

Johnson & Johnson (JNJ) is perhaps the largest medical-supply producer and supplier in the world, and vital medicines as well as equipment are required by both individuals and hospitals. So despite their recent legal issues, I think this company will more than survive and you might want to consider it for your shopping list.

As you can see from the chart above, the share prices of these stocks have held up fairly well and the following chart will show the dividend yield currently of each:

Data by YCharts

These Dividend Aristocrats and Kings are probably strong candidates for continuing their amazing streaks of both paying and increasing their dividends even through these uncharted waters. Their yields are not huge and are manageable given their cash reserves, revenues, lower debt levels and ongoing business.

I consider them reasonable and reliable even though I know that anything can happen!

As I stated, I am not advocating that folks "back up the truck"; instead, you might prudently consider adding them to your shopping list. The share prices could go down further for better entry points, or they can go up in the near term. If you are familiar with selling put options at a price you would love to own these stocks at, not only might you hit a real bargain, but you will be paid immediately the premium for selling these puts.

If you are not familiar with simple option strategies, then either stay away or do some research on the advantages and disadvantages and learn about them.

Keep in mind that during this crisis capital preservation is most important, especially for those nearing or already in retirement. If you do decide to nibble, consider teeny tiny bites over time until this market can sort itself out.

I am certain that the Seeking Alpha community could suggest other candidates for your shopping list and look forward to everyone sharing their opinions right here!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Retirement Strategy: Put Together Your Shopping List For When The Time Comes - Seeking Alpha