The conventional thinking not so long ago had CVS on its way to becoming "roadkill," destined to be yet another retailer "obliterated by Amazon," Cramer noted in an exclusive video-conference call with members of this Action Alerts PLUS investment club.
Instead, CVS's CEO, the "bankable" Larry Merlo, decided to go big and transform CVS from a vulnerable brick-and-mortar retailer to a "health care store" by buying insurance giant Aetna.
The merger was initially rocky, Cramer noted. In fact, when CVS shared were mired in the $50s, Merlo called Cramer and offered to walk him through a store, Cramer recalled.
"I found myself with a confident Merlo who told me and everyone else who would listen that the estimates were done going down and that the Aetna-CVS merger would be good for shareholders," Cramer noted.
CVS is trading much higher today, hitting $74 a share as recently as Thursday, with the potential to move into the $80s, Cramer said.
So how did the market get things so wrong?
"It simply didn't believe Merlo had a handle on his business," Cramer noted. "It chose to think he was being too optimistic when he talked about how the two were integrating."
That changed after Merlo began producing the numbers that made clear he was right all along.
"Merlo was telling the truth," Cramer said. "There was no reason to doubt him to begin with."
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