Cramer turns top hedgie theme into individual stock plays

(Click for video linked to a searchable transcript of this Mad Money segment)

"I was mesmerized listening to John Paulson on Wednesday at CNBC's Delivering Alpha Conference in New York," Cramer said.

Although Paulson spoke about many things, the Mad Money host was most intrigued by the top money manager's comments on housing. "Paulson's going way against the grain with his call."

Widely followed in part because Paulson suggested shorting subprime mortgages right before the crisis, now Paulson is on the other side of the trade entirely.

He's bullish. Extremely bullish.

"Paulson does not think the near-term negatives can overwhelm a longer term comeback," Cramer said.

That is, Paulson isn't spooked by the spike in interest rates. "He says what really matters is affordability, the cost of owning versus renting, and appreciation. And all three favor gains in the real estate market," Cramer explained.

"Therefore, his first idea at the conference was to tell everyone who is renting to buy a home," Cramer said. "His second idea was to buy a second home."

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"In addition, he's also a buyer of mortgages, mainly the triple AAA rated portions of the mortgage bond," Cramer said. And because Paulson believes areas of the nation that were hardest hit should bounce the most, "he suggests buying raw land in areas such as Arizona, California, Colorado, Florida and Nevada."

Of course Cramer realizes that most individual investors don't have the capital to buy land or mortgages or even a second home. However, Cramer still thinks individuals can benefit from Paulson's insights, simply by putting money to work in single stocks that benefit from these themes.

After hearing from Paulson, Cramer thinks at least four stocks are worth a look - two banks and two mortgage insurers.

Banks: Bank of America and Wells Fargo.

"BAC owns exactly what Paulson owns, homes, mortgage bonds, and the like and even though the company was cautionary about the mortgage pipeline Paulson sure makes you feel that while short-term caution is warranted, long-term bullishness is persistent," Cramer said.

"Same with Wells Fargo, the largest home lender in the land which is still going up after a remarkable quarter."

Mortgage insurers: Radian and Genworth.

"Radian, which you know I think is the among the best specs of 2013, is insuring precisely the stuff that Paulson thinks is either coming back to life or is totally money good because of the rise in housing prices," Cramer said. "Meanwhile, Genworth also has a large mortgage insurance business that is dramatically under-appreciated."

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It's worth noting that if you're thinking about buying homebuilders, Cramer said they may not have as much upside. "I don't think they are as good as the banks or the mortgage insurers. They have lots of competition and the companies are pretty promotional."

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