Cramer’s 10 Hottest Momentum Stocks
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Sherwin-Williams (SHW)
Sherwin-Williams is likely another anointed stock on Wall Street, Cramer said. After all, he considers it a "terrific proxy" for the U.S. housing recovery.
"When you decide to sell your house, the first thing you do is give it a new coat of paint to freshen it up and then the new family moves in and they want to pick their own colors, so they repaint it again, " Cramer said, adding that smart hedge fund managers will play a rebound in the housing market by way of Sherwin-Williams.
(Related: How Investors Could Play a Recovery in Housing .)
In its latest quarter, Cramer noted Sherwin-Williams' same-store sales increased by 13.9 percent while is overall sales grew by 9 percent. In turn, Sherwin-Williams increased its earnings-per-share by 31 percent.
"Not only is Sherwin-Williams selling more paint thanks to the housing rebound, it's also taking share, cutting costs, and going forward it could benefit from declines in the raw materials that go into paint, " Cramer said. "Some of this company's most important raw costs have either stabilized or already come down. The price of propylene, which is a key feedstock for Sherwin-Williams, has declined in a major way and so has titanium dioxide, another crucial ingredient for making paint."
Sherwin-Williams currently sells for 19.2 times next year's earnings with a 16 percent long-term growth rate. Cramer admitted the stock is not exactly cheap, but he still thinks hedge fund managers could be willing to pay up for this high growth stock.
Diageo (DEO)
If you're thirsty for growth, Cramer thinks Diageo is a good place to look. And it's not just because Diageo is a major liquor company — he thinks it ranks among the hottest momentum stocks.
"Diageo is a master of branding, " Cramer said, noting it owns many global liquor brands, including Johnnie Walker Scotch whisky, Crown Royal Canadian whisky, J&B Scotch whisky, Buchanan's Scotch whisky, Windsor Premier Scotch whisky, Bushmills Irish whiskey, Smirnoff vodka, Ketel One vodka, Cîroc vodka, Captain Morgan rum and rum based products, Bailey's Irish Cream liqueur, Jose Cuervo tequila, Tanqueray gin, and Guinness stout.
(Related: Beer for the South Pole: Dude, That's Cold)
Compared to other major liquor companies, Cramer said Diageo has the least exposure to Europe and the most exposure to emerging markets, accounting for 21 percent and 40 percent of its business respectively. It is the number one international spirits company in Africa, Asia and Latin America, Cramer said.
"In 2005 these markets accounted for just 20 percent of the company's sales, [but] by 2015 they should make up more like 50 percent, " Cramer said. "This is the alcohol stock to own. It's up 30 percent so far this year and I think it rallies even more before 2012 is over."
Diageo currently trades at 15.5 times next year's earnings with 10 percent long-term growth rate, which Cramer noted is much cheaper than other liquor companies.
