Wall Street loves a company that executes well. Good execution makes it easier for investors to trust that management will deliver on its promises and navigate through difficult times, Cramer said, times like right now.
On Wednesday's Mad Money, he held up CVS Caremark [CVS
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] as an example. The pharmacy used to sit in second place behind rival Walgreen [WAG
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], but CVS arguably has since taken the lead thanks to its acquisition of Caremark.
CVS recognized there was money to be made as drugs come off patent and bought Caremark, a pharmacy benefits manager, to take advantage. Homegamers who tuned in Monday know just how much money there is to be made in this trend over the next five years. (Remember Cramer's call on Medco?) So now instead of paying a company like Caremark that extra profitability, CVS keeps it.
Walgreen, in the meantime, did nothing -- and it shows. WAG's same-store sales are now lower than CVS's. And even if CVS wasn't on top, Cramer said, it has the Caremark business to fall back on. Walgreen, on the other hand, has no fallback. The former number one isn't even improving its existing stores. It just keeps putting up new ones, a failing strategy considering CVS has proved that's not where the growth is.
"The bottom line is CVS has out-executed its rival," Cramer said, "a rival that used to be the better company, to become top dog."
Click for the rest of Wednesday's show |
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