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Cramer's March Madness Sneaker Stock

Cramer has recommended a number of shoe stocks over the past couple weeks, but on Monday he declared outright that a bull market is happening in this industry.

How does he know? Instead of focusing on just the individual companies, a few of whom have returned triple-digit gains over the past year, Cramer noticed a distinct pattern in this area of retail. In short, shoes are flying off the shelves.

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That’s what Macy’s said when it reported its most recent quarter. As did Saks and Nordstrom . These departments stores serve as great tells for the specific kinds of merchandise that consumers want, and right now that’s footwear.

DSW , the big discount shoe retailer, missed its earnings estimates last quarter, but management specifically mentioned a “blow-away boot season,” which accounted for over half its fall season growth. The company also talked up so-called toning shoes, which are supposed to work out a wearer’s legs while walking.

Foot Locker missed its earnings estimates, too, but, again, pointed to strength in the industry overall, namely in improving sales trends in its US and international businesses. And same-store sales for January and February were up. Another shoe retailer, Finish Line , reports this coming Thursday, but Cramer reminded viewers that the company already upped its dividend in December. That came after Finish Line reported a better-than-expected quarter, and he sees the dividend increase as a sign of more strength to come.

Then there are the shoe brands themselves: Deckers , Skechers USA , Nike and even Steven Madden , which Cramer gave a nod to for the first time. All of these stocks are roaring right now, and he expects still more gains to come. But if he had to choose a favorite, it’d be Nike.

That doesn’t mean he’s telling you to sell the other three. But these days Nike is the best of the best, Cramer said. The company just beat the Street’s consensus earnings estimates for its most recent quarter and posted an all-important gain in future orders – a program that allows retailers to order merchandise five to six months in advance – despite a decline the quarter before.

Even more important, though, is that the earnings beat came through increased sales, not cost cuts. That means earnings growth is picking up after a virtual flatline for several quarters. And as Goldman Sachs recently pointed out, Nike has enjoyed two periods of big gains that lasted for multiple quarters in the past decade, and both came with earnings acceleration – which is where the company is right now. Once that earnings growth hits the double digits, Cramer said, there’s a very good chance the hedge funds will rush in and take up the share price.

Cramer also likes the fact that virtually every major sporting event of the next three months should be a catalyst for Nike, from March Madness and the NBA playoffs to Wimbledon and the World Cup. Plus, the company is strong in one of retail’s most important metrics: inventory control. Nike ended its latest quarter with inventories down 13% year-over-year.

Finally, while the other three stocks have run into the aforementioned triple digits – with Skechers up 401%, Deckers up 163% and Steven Madden up 152% in the past year -- NKE has added just 54% over the same period. That leaves plenty of room for Nike to run.

Nike may be trading at a higher multiple than the average of the other three, Cramer said, but you have to be willing to pay up for best of breed.

Call Cramer: 1-800-743-CNBC

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DECK
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FINL
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FL
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JWN
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M
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NKE
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SHOO
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SKS
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SKX
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