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Jim Cramer: Roundy's Stock Ripe for Speculation

Fresh-faced grocer chain Roundy's is one small-cap spec play with little fanfare but plenty of upside potential, Jim Cramer said Friday.

The "Mad Money" host said the Midwestern supermarket brand — with its $440 million market cap — was right in the speculative sweet spot because of its "notoriously B.I.G." dividend and glorious 8.5 percent yield. Both are highly unusual for a small-cap company.

"That’s an incredible yield," he said. "Even if this stock flat-lines and goes nowhere, by reinvesting that dividend, Roundy’s would allow you to double your money in about eight years."

But Cramer doesn't think the stock is going nowhere. While the price only popped a meager 6 percent after the company filed its IPO back in February (priced at $8.50 a share), Roundy's has quietly risen an additional 21 percent in the aftermarket since then. And even with the soaring yield, he said, the payout is perfectly safe.

"Roundy's has more than enough money to foot the bill, and management is super committed to returning its cash to shareholders in the form of a bountiful payout."

Relative to other grocery store stocks, Roundy's 8.5 percent yield is approximately three times higher, but Cramer posited that the yield will go down once buyers discover the stock and push up the share price — just as it did with Cramer fave B&G Foods.

"In other words, when you value this one based on yield, it's incredibly cheap," he said. The classic stealth stock is also "insanely cheap" because of its tiny multiple, selling for just seven times earnings while most supermarkets trade at 10 times earnings.

Roundy's is also the leading player in a bunch of niche markets throughout the Midwest — boasting a 55 percent market share in its hometown of Milwaukee and more than 32 percent in Madison, Wisconsin. The firm continues to expand aggressively into Chicago.

"They really dominate these local markets by understanding exactly what their customer wants," Cramer said. "It's the polar opposite of the struggling national chains that are spread across the whole country and out of touch with the consumer just about everywhere."

He also expressed faith in the company's management, consisting of CEO Bob Mariano and CFO Darren Karst. Both were able to take Dominick's public back in 1996 and sell it to Safeway two years later for three times its initial price. "If they can pull off the same thing with Roundy's, then I bet you'll make a bundle," he said.

Next year, the company is expected to earn $1.49 per share. Cramer advised viewers to do their homework this weekend and get in on the buy before the stock starts gaining too much traction.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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