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A Timber Trade on Housing’s Resurgence

With the Dow losing more than 200 points on Tuesday, Cramer said during Mad Money, this is your chance to buy housing stocks.

Yes, housing stocks, even though the pundits and press say the sector’s a dangerous place to be because of high unemployment, impending foreclosures and “shadow inventory.” But if that’s the case, then why did housing and its related stocks deliver some of the best earnings reports this season?

That’s because, despite the constant negativity, a lot of good things are happening here, Cramer said during Mad Money. Worry about the end of the housing tax credit all you want, but he thinks we’ve seen a bottom, plus or minus 5%, in the pricing of every major area in this country (except for the hardest-hit places in Florida). And while both new- and existing-home sales are increasing, inventories are shrinking.

There’s even been some home-price appreciation in a lot of important markets, say, California. Plus, Federal Reserve Chairman Ben Bernanke seems intent on keeping interest rates as low as possible until we get much-needed job growth in this country. And people shouldn’t be so concerned with that shadow inventory, not with so much pent-up demand and banks doing what they can to keep people in their homes.

Hence that great quarter from DR Horton. Last Friday, the company’s fiscal second quarter came in 5 cents a share ahead of Wall Street’s expected loss of a penny. Revenues were up year-over-year, too, as were orders and the backlog. And management predicted a strong third quarter thanks to home closings by June 30, the day that federal tax credit ends.

But DHI wasn’t the only housing play to blow away the numbers. Simpson Manufacturing , Owens Corning, Whirlpool , Fortune Brands, Stanley Black & Decker and Lennox International all generated tremendous upside surprises in April. Cramer is highlighting these kinds of earnings beats all week on Mad Money, giving investors his favorite stocks to own going forward.

Cramer’s favorite play in the group, though? Weyerhaeuser, one of the world’s largest integrated forest products companies, which gets about 80% of its sales from housing.

While the charts seem to doubt the stock’s ability to rally, he said the fundamentals – better pulp pricing, the economy’s recovery and what Cramer thinks will be a housing shortage by Dec. 31, 2011 – should drive this stock higher.

Plus WY should soar when it converts into a real estate investment trust in the second half of the year. That’s what happened to Potlatch and Rayonier when than became RIETs.

“I think you want to be in front of this Weyerhaeuser conversion,” Cramer said of the conversion, “and own the stock ahead of the news.”

Cramer’s charitable trust owns Stanley Black & Decker and Weyerhaeuser.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

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