Cramer's 'Mad Money' Recap: Retail Best of Breed Redux

Lowe's High Bar

While he likes Best Buy because it's the king of electronics retail, Cramer likes the second-runner-up in hardware stores, Lowe's(LOW Quote).

The "undisputed king of hardware stores" is Home Depot(HD Quote), he said. But in this case, being No. 2 gives Lowe's a growth advantage.

There is no fast-growing runner-up barking at Best Buy's heels, Cramer said. But Lowe's has more space to grow and "growth is really the way these companies get valued by the institutional guys" who are largely responsible for setting prices.

"Shrug off the tyrannical yoke of the 'Home Despot,'" he said, because Lowe's growth will make it the hardware store to buy.

Low-Costco, High-Talent Management

"I am convinced that Costco(COST Quote) is the cheapest and the best-run of the big warehouse stores," Cramer said, referring to the No. 3 company on his list of "retail royalty."

Wal-Mart(WMT Quote) is the word's largest retailer, but he believes that Costco is better run and will have more opportunities to grow its number of stores and the types of products it sells.

Costco is branching out into electronics, which he said should make it a lot of money because its members never need to worry about warranties. And it already sells baked goods, books and art.

It has a "reverse chic thing going on" that Wal-Mart probably won't have, he added, referring to the fact that the Costco parking lot is filled with luxury cars and the stores have well-heeled customers. It may be a discount warehouse, but wealthy people love it, he said.

Moreover, Costco pays its employees well, which flies in the face of conventional wisdom that retailers must pay workers slave wages to make money.