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Cheap stocks: Cramer’s favorite buy under $10

(Click for video linked to a searchable transcript of this Mad Money segment)

You don't have to be rich to run with Jim Cramer. You can generate big profits even if you have a small wallet.

Although the "Mad Money" host doesn't think that 'buy' decisions should ever be based on a stock's price, per share, he does recognize that not everyone has the capital to buy high dollar stocks.

Therefore, he's been scouring the market looking for a good stock that doesn't cost a lot. And his research has led him to Rite Aid which closed Friday slightly under $7.

In fact, of all the stocks trading below $10, Cramer likes Rite Aid best. He believes the company and therefore shares are facing a slew of tailwinds. For example:

1. Regardless of how you feel about the Affordable Care Act, there's no doubt at this point that it's going to allow millions of uninsured people to get healthcare coverage, and the more people who have insurance, the more prescriptions Rite-Aid can fill.

2. The population is aging, every year our country's demographics skew older and older, and older people need more prescriptions.

3. This year alone drugs going off patent will total $35 billion. That's bullish for the bottom line because generic drugs carry much higher margins for pharmacies than patent protected ones.

Fuse | Getty Images

Of course, Cramer realizes that the catalysts outline above should benefit all drug stores, not just Rite Aid. However, there are additional catalysts that he sees that are specific to this company.

A. Rite-Aid has implemented an aggressive remodeling program. In the last three years, Rite-Aid has converted 1,200 of its 4,600 stores, more than a quarter, to their new format. "The new format delivers front-end same store sales that are 300 basis points higher than the non-remodeled locations," Cramer said.

B. Rite-Aid has aggressively shut down underperforming stores to focus on profitability.

C. Rite Aid has 25 million loyalty card members, and over the past year, Rite-Aid has been using information collected from those costumers to bring a new level of sophistication to their targeted marketing campaigns. "Ultimately, that creates more traffic and customers buying more merchandise on each visit," Cramer said.

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When you add up items 1,2 and 3 and combine them with A,B and C, Cramer says you get plenty of positive catalysts. "Therefore, I think there's a lot more upside ahead, however, there's a small caveat.

"I also don't want you to chase," Cramer said. Shares popped more than 12% over the last 5 days, due to the Street's enthusiasm about earnings. "Although I like the stock I wouldn't buy right away. I'd wait and buy into weakness. And considering the volatility of this market, I think you'll get a lower entry point before you know it."

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