CVS has been nimble during the pandemic

The Motley Fool Take

Some businesses are hurt more than others by pandemics and recessions. One company with some resistance to both is pharmacy chain CVS Health. Yes, the COVID-19 pandemic has reduced foot traffic in its stores and hurt in-store clinic revenue. But the pandemic is not likely to be a long-term issue, and CVS has responded nimbly. Indeed, it was recently operating more than 1,800 COVID-19 testing sites nationally — and it’s offering virtual doctor visits with its MinuteClinic “E-Clinic” program.

One of the steadiest tailwinds for CVS Health is that America’s population is aging. As life expectancies lengthen and baby boomers hit retirement, reliance on prescription medicines to improve overall quality of life should increase. Since pharmacy sales generate about three-quarters of CVS revenue, an aging population with easy access to prescription medicines is a good thing.

What’s more, CVS Health has been pushing the personalized medicine narrative at many of its locations. The company has plans to open around 1,500 of its HealthHUB clinics around the country by the end of next year, offering services that include management of chronic conditions like diabetes.

With a recent forward-looking price-to-earnings ratio in the single digits, and a dividend yield topping 3.3%, CVS Health deserves consideration for long-term portfolios. (The Motley Fool has recommended CVS Health.)

Ask the Fool

From G.V., Tulsa, Okla.: I saw that Exxon Mobil was removed from the Dow Jones Industrial Average. What happened?

The Fool responds: Many don’t realize this, but the Dow Jones Industrial Average is an index of only 30 companies. Every few years, to better reflect our diversified economy, some components of the Dow are ejected to make room for new ones. In the latest move, Exxon Mobil, Pfizer and Raytheon Technologies were replaced with Amgen, Honeywell and Salesforce. These changes reduce the index’s exposure to energy and traditional pharmaceutical companies while increasing representation of technology and biotechnology.

In 2018, General Electric was shown the door to make way for Walgreens Boots Alliance, while Apple replaced AT&T in the index in 2015. The last major shakeup occurred in 2013, when Alcoa, Bank of America and Hewlett-Packard departed, making room for Goldman Sachs, Nike and Visa.

From L.U. in Federal Way, Wash.: What is deflation?

The Fool responds: We all know about inflation, which is the steady rise of prices over time. As you might have suspected, deflation is when prices fall. That might seem like purely a good thing, because falling prices mean you can buy more with your income.

But deflation isn’t always good because it often accompanies a recession or a struggling economy. It can be part of a cycle where many people are out of work: They postpone purchases because they’ve lost income, then companies lower production due to reduced demand, then even more people lose jobs. In a deflationary spiral, the economy contracts rather than grows. Meanwhile, businesses (and people) earning less money can have trouble paying down their debts.

Deflation can be countered by lowering interest rates, but rates can only fall so far.

The Fool’s School

Retirement planning is tricky. We need to save enough money to live on in retirement, and we also have to figure out how much we can withdraw from our nest eggs each year without depleting them too quickly.

It’s a tough problem, and there’s no one-size-fits-all solution. Many look to the 4% rule, which suggests you withdraw 4% of your nest egg in your first year of retirement and then adjust that for inflation in subsequent years. That assumes a portfolio mix of stocks and bonds, and it’s likely (though not guaranteed) to make your money last for 30 years.

Another approach, suggested by the 1998 Trinity study on retirement savings, is to withdraw between 3% and 4% each year from a stocks-and-bonds portfolio to make your money last for 15 to 30 years. Examining stocks and bonds from 1926 through 1995, the researchers found that having bonds makes a nest egg last longer for retirees withdrawing smaller percentages, but that having at least 50% in stocks is best for most portfolios.

Unless you have a huge nest egg, these rates won’t give you a lot each year. With a $300,000 portfolio, for example, a 3% withdrawal would give you $9,000 for the year, while withdrawing 5% would deliver $15,000.

Be sure to factor Social Security income into your retirement plan, and read up on how to maximize those benefits. Consider working a few more years, to save and invest even more, and look into immediate annuities, too, as they can allow you to lock in reliable income.

Many experts recommend being flexible with withdrawal rates: When the economy is booming, withdraw more. When it’s struggling, withdraw less. This is especially true in the early years of your retirement: A big stock market crash early on can lead to your money running out sooner.

This is complicated stuff, so read a lot more about it — and consult a financial adviser. You can find fee-only advisers near you at

My Dumbest Investment

From S., online: My dumbest investment was accidentally selling my shares of Shopify at $38, when I had intended to buy more. I didn’t buy them back to avoid paying an additional transaction fee. Lessons learned: Pay attention when submitting orders — and price is what you pay, value is what you get.

The Fool responds: Shopify, which offers a widely used e-commerce platform, has been on quite a tear in the past few years. It began 2016 at around $25 per share, and began the next four years at around $43, $102, $134 and $404, respectively. It has recently been trading around $900 per share.

Clearly, in retrospect, it was a blunder not to buy (and hold) more shares at $38. But at the time, you didn’t know just how much it would soar. Then, as now, you could have asked yourself questions such as: Is this a high-quality, healthy company, with little debt and great growth prospects? Is it attractively priced, not overvalued?

Opinions are mixed on the stock’s value these days, as it has run up so much. Bulls expect it to keep growing and rising, but bears think it’s overvalued and might pull back. Note that many big brokerages now offer commission-free trading, which could keep you from making future investment decisions based on transaction fees. You can learn more about good brokerages at our sister site,

Who am I?

I trace my roots back to Japan in 1889, when a young man founded a company to make and sell playing cards. I expanded into other games in the 1960s, electronic arcade games in the 1970s — and home video games in the 1970s, as well. In 1989, I introduced one of the first portable handheld game consoles — named for young men. That was followed by systems such as Wii and Switch. My American subsidiary launched in 1980. Shortly afterward, I introduced two Italian plumbers to the world. I’ve sold more than 750 million game consoles worldwide. Who am I?

If you can’t remember last week’s question, find it here.

Last week’s trivia answer: Church & Dwight

The Vanguard 500 Index did better than 74% of its managed competitors.

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