Mad Money

Cramer’s Dollar Stores Play

Do Dollar Stores Make Sense?

In this barbell economy, where high-end and low-end names do well, you need to find companies that appeal to the desire of most consumers to trade down, Cramer said Monday. And the dollar stores are the best example of this, he said.

“These stocks have become one of the few safe-havens even when the market gets hammered, as it did last week,” he said. “People know dollar stores are safe because they thrive when the consumer is looking for a bargain."

But which dollar store gets top billing?

The “Mad Money” host’s favorite is Dollar General . It did a 25 million share secondary offering on Thursday, and barely went down on a terrible day in the market. It also has seen its same-store sales increase 5.9 percent last quarter and has cleaned up its balance sheet.

“Better still, Dollar General is almost as cheap as its merchandise. It sells for just 13 times earnings estimates but it’s got a 16 percent long-term growth rate,” Cramer said.

Cramer also likes Family Dollar , but said it is riskier than Dollar General. The company is facing tough comparisons going forward and is still in the early phases of a big restructuring. In this market, Cramer suggests playing it safe with Dollar General.

Dollar Tree has less upside than Family Dollar or Dollar General, so while Cramer likes their store he doesn’t think now is the time to buy the stock. And he wants to you stay away from 99 Cents Only, which missed on earnings when it reported last quarter.

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