Mad Money

Cramer: Housing Has Bottomed

Cramer's Fixer Upper Stock: Masco

The U.S. housing market seems to have bottomed, Cramer said Tuesday, pointing to improved housing data points such as pending home sales and multi-family housing starts. In addition, shares of most homebuilders have soared lately.

The “Mad Money” host doesn’t recommend playing the homebuilders, though, because he thinks this group has run too much. Furthermore, these stocks are just too risky. Instead, he prefers indirect housing plays, such as companies that benefit from the surge in remodeling and renovation. On Monday, he highlighted timber company Weyerhaeuser and is now setting his sights on Masco .

(RELATED: Why Cramer's Betting on Weyerhaeuser)

The Taylor, Mich.-based company’s largest end market isn’t new building, but the repair and remodeling market, accounting for 46 percent of its sales. Unlike with new construction, investors don’t need to wait for the turn in housing to happen because there is already a surge in remodeling.

Cramer also likes this stock’s 2.6 percent dividend yield. It’s not stellar, he admits, but it’s a safe yield even if housing stays flat in the year ahead.

Masco’s stock currently sells for 38 times this year’s earnings estimates, a sky-high multiple, especially for a company with a 15 percent long-term growth rate. But with this kind of cyclical stock, Cramer said it’s best to buy when the price-to-earnings multiple is at its highest because that means earnings are depressed. So as business improves and earnings increase, the stock will look cheaper, but it will only appear to be less expensive. Cramer thinks now is the time to buy.

When this story was published, Cramer's charitable trust owned WY.

Call Cramer: 1-800-743-CNBC

Questions for Cramer?

Questions, comments, suggestions for the Mad Money website?