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Cramer plucks babies from bathwater

Cramer: Panic doesn't pay

During a nasty selloff, all too often, investors throw out the proverbial baby with the bathwater. In today's market, the babies are a metaphor for stocks; specifically stocks that may be oversold.

"I have been waiting for moment where I thought the reward was better than the risk for some stocks. And I think that we may have at last arrived there," Cramer said.

Cramer is particularly interested in companies that hedge funds have been selling to raise funds, because many of them are domestic, and, he believes the U.S. economy is relatively strong.

"Yet that strength, ironically, is a negative for these stocks, because it makes these stocks a source of funds for wounded hedge funds," Cramer explained.

Noah Clayton | Getty Images

However, Cramer says that won't always be the case.

Ultimately, he believes fundamentals will come back into play, and when they do, Cramer thinks these stocks will be among the first to rally. Before that happens, however, Cramer says, a shrewd investor will buy.

Of course, that begs the question, how can you identify a stock that's likely oversold versus a stock that deserves to be lower?

Here's Cramer's criteria:

1. The company's primary market has to be domestic, largely insulated from overseas events.
2. Lower commodities should generate tailwinds for the firm, making input costs lower on a relative basis.
3. Earnings should have every reason to be good or, at least, getting better.
4. Higher interest rates should not be a direct driver of profits.
5. The strong dollar should not harm the firm; in other words the company shouldn't repatriate significant profits from another currency, not should it be a big exporter.
6. Growth should have reason to remain relatively strong, even if the economy sputters.

Given the criteria; here are those babies Cramer would pull from the tub.

"Let's start with some obvious ones. How about Darden, the owner of Olive Garden? They're a big beneficiary of lower gasoline prices and they buy tons of commodities. It could be a big winner, " Cramer said.

Cramer also thinks Jack in the Box, Domino's and Buffalo Wild Wings all make sense. Also he likes Panera Bread and Chipotle, which Cramer noted was down 30 points from its high.

"Or you could buy Tyson Foods, " he added. "It's a huge buyer of chicken and pork as part of that Hillshire Brands acquisition. Or how about Macy's, Kohl's or Costco on the retail front? They all work. So does Walgreen's now that the worst is over. Same goes for VF Corp and PVH. They're all takers of commodities, especially cotton. Kroger is a good bet with lower commodity prices, too. "

Cramer also suggested positions in Google, Celgene, Facebook, or Under Armour, as bets on growth, even if the globe slows. Also Cramer likes beverage plays.

Read more from Mad Money with Jim Cramer
Cramer's Remix: Don't surrender to selloff
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"Now I don't want you to get carried away," Cramer added. And make sure to do your homework. Companies tethered to global growth, such as industrials, may still face significant downside.

"Nonetheless, I do think that if you haven't committed any capital yet, the time is at hand, as long as you're strategic."

Call Cramer: 1-800-743-CNBC

Questions for Cramer?

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