Cramer’s got a special stock he picked out for the 500th episode – the home lender/quasi-government agency Fannie Mae . This stock is at the precipice of a massive upgrade cycle, Cramer says, and he thinks the time is just right to get in.

Fannie Mae isn’t just another financial stock. A lot of the company’s success is determined by the fortunes of the Democratic Party. When the Republicans controlled Congress, they were doing everything they could to send the big repackages of mortgages to the major banks instead of Fannie Mae. But the Democrats put a stop to that when they took both houses last November. Cramer thinks if they get the White House next year, Fannie Mae will be the biggest publicly traded beneficiary of that win.

Regardless of which party controls Washington, there are still plenty of ways to win with FNM, Cramer says. Since it’s backed by the government, it can issue bonds much more cheaply than private companies. And as the subprime lenders continue to implode, Fannie Mae basically becomes subprime lender to the nation, Cramer says. As rates go higher, FNM becomes the lender of last resort.

Fannie Mae’s got a credit guaranty business that doesn’t generate a lot of buzz but does generate huge returns. It’s actually the key to the company’s growth because there are no restrictions on how much it can grow its mortgage portfolio. And if that weren’t enough, FNM boosted its dividend, signaling confidence in its financials, and trades at a low multiple – only 12x earnings despite an accelerating 9% growth rate. It’s got about $13 billion in excess capital as mandated by an agreement with the Office of Federal Housing Oversight. That cash could be returned to shareholders through buybacks or more dividend increases, Cramer says.

Jim’s charitable trust owns Fannie Mae.

Questions? Comments?