Cramer's Retail Pick Through Year End

With the Dow closing down 78 points Monday, Cramer found just three stocks in the green: F5 Networks, Ford Motor and Walmart.

Shares of F5 , he explained, pushed higher because the market learned the company had, at one time, been contacted about being acquired. Ford , meanwhile, rallied because Morgan Stanley initiated coverage on it with a “buy,” he said. Walmart's gains, however, were not prompted by any one catalyst.

"There was nothing manmade about the Walmart rally," Cramer said. "It was strictly organic, 100 percent natural."

The retail giant is gaining strength on its own, Cramer said. Last week, it acquiredMassmart, the third-largest retailer in Africa. At $4 billion, it was an expensive transaction, but Walmart now gets 25 percent of sales from outside of the US. With more than 8,500 US locations, Cramer thinks same-store sales will only improve because they were so bad last year.

Based on valuation, Cramer thinks shares of Walmart are cheap. It's selling at 12 times earnings, two multiple points below its historic level and well below what's known as the market multiple, the average multiple for stocks in the S&P 500. Its dividend yields 2.2 percent, but Cramer said he's seeing dividend growth of 11 percent. The company is also helping out shareholders with $10 billion left in its buyback program, he added.

There are three things happening at Walmart in areas that previously had Cramer worried. First, the retailer has brought back Action Alley, a special promotion aisle, even though the reduced prices cut into profits. They're also carrying a greater variety of name brands. Lastly, it's improved the quality of their own brands.

"When a stock goes up based on nothing on a down day, especially a down hard day like today, you can only speculate as to how high it will go when the market rallies," Cramer said. "Walmart may just be the retailer to own from now until year end, the perfect combination of renewed growth courtesy of international acquisitions, better merchandise, easy comparisons and a cheap valuation that fits the parameters of pretty much every mutual fund and hedge fund manager out there."

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