Cramer: Whole sector looks undervalued

There's a lot of talk about froth in the market. But Cramer doesn't want it to scare you away from these stocks.

"The froth police are everywhere," noted Cramer on Monday's broadcast. That is, a growing number of pundits are raising concerns about stock valuations.

Those skeptics feel the market is assigning such lofty premiums to some stocks, it may be almost impossible to realize the valuation through earnings.

For example, at $41 Twitter has a market cap of $22 billion. According to published reports to support even a valuation of $8 billion, Twitter will need to grow its revenues at a compounded growth rate of nearly 30% per year, for the next ten years.

That's a tall order. Skeptics say it's a sign of broad irrational exuberance in the market.

Although Cramer concedes that some stocks may be overvalued, he also believes concerns about irrational exuberance are overblown.

In turn, he thinks those concerns may be obscuring opportunity.

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"There are plenty of companies with tremendous momentum that are moving up not because of froth but for very rational reasons -- business is improving," Cramer said.

Cramer thinks the retail sector falls into this category.

Despite a 10% gain in the XRT after 3 months, "I can't help but think is under-valued. The group had been kept down by threats posited by the sequester, the government shutdown and the uncertainty surrounding Obamacare," Cramer said.

But these negative tailwinds are starting to die down. And as they do, Cramer thinks a sharp advance in retail makes sense.

In fact, Cramer thinks the rally should have been even bigger – and would have been even bigger – except that concerns about froth tempered the advance. "Therefore, I think retail as a sector might still be undervalued," Cramer said.

Cramer feels the same about .

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"If we get the prosecutions to stop, the law suits to go away and even a slightly higher ten year while cd rates stay the same, earnings could be magnificent," he added.

All told, Cramer sees plenty of opportunity in the market. "The froth police are everywhere. But, I just don't see why the entire market should be contained by their skepticism."

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