Rule No. 1:"Don't dig in your heels when you're wrong"
Rule No. 2:"Price matters"
Rule No. 3: "Don't take your cue from an inferior company"
When a "worst of breed" name says things are bad for the entire sector, don't just take it on faith, Cramer said. Weak players always seek to pin their failings on the entire industry, he explained.
It's important, then, that investors are able to recognize the excuses. If a company has gotten into the habit of serial underperformance and blames its shoddy results on a shoddy environment, Cramer said the odds are that its competitors will tell a different story.