Vishnu Lekraj: CVS reported mixed results today as strong top-line growth is accompanied by profit compression. The firm's investing into its business in order to make a smooth transition for its Aetna acquisition, which we find as a positive development. We believe Aetna and CVS combined will be a strong, narrow-moat company that's going to produce economic profitability over the longer term.
Despite some near-term headwinds for the quarter, we believe the firm is positioned well for the long term and this should add to its operations. We expect this deal to close within the next couple of months. As a result, the firm is making some investments which may hit the bottom line, but we believe these long term investments will again churn out long term economic valuation.
Given a long-term positive for CVS, in combination with its undervalued stock, we believe it's a good opportunity for investors to acquire a very high-quality asset at a discounted price.