How to React to a Crisis
Moments of crisis can make terrific buying opportunities in the right stocks, Jim Cramer said Friday on CNBC's "Mad Money."
So how do you go about weathering the crisis and finding the right names?
First, you must put the event in perspective.
“We have to ask ourselves, okay, the news is potentially tragic, potentially dangerous, potentially terrifying, but what effect does it have on the earnings per share, the numbers?” Cramer said.
He suggests making a list of names that are unaffected by the event, and be ready to buy them when a market-wide sell-off happens based on the crisis.
Step two, Cramer said, is to ask yourself if the event is really bad for all earnings out there.
For example, oil stocks — which benefited from higher oil prices — got knocked down when the Egyptians were demonstrating in early 2011. That was a tremendous buying opportunity, he said.
“There will never be a shortage of terrifying events around the world that bring down the whole market,” Cramer said. “The next time it happens, don't run away because there might well be an opportunity for you to make a very big profit.
—Read on for Cramer's Top Dividend Stocks
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