Mad Money

Cramer: Use the earnings 'damage' to your advantage this week

Key Points
  • "Mad Money" host Jim Cramer advises investors on how to use their cash wisely during a volatile week of earnings.
  • Cramer says now is the time for long-term buyers to build up their positions.
Use earnings 'damage' to your advantage

On a down day for the major averages, CNBC's Jim Cramer said that investors should look at Monday's broad-based dip as an opportunity.

"If you've been waiting for a pullback to do some buying, this is your moment," the "Mad Money" host said. "This week we're going to run a gauntlet of important earnings reports, and while I think we can get through it OK, I bet there will be some damage. And you know what? That damage is [the] first chance for long-term investors to buy into weakness this year."

Cramer said investors should use the pullback to buy into an index fund, putting a small portion of their funds to work each day to hedge against uncertainty.

With a fifth of the reporting earnings this week, Cramer pointed out that the odds of the bull rally continuing are small. Each report is a chance for stocks to get hit, he said.

For example, if you have $2,000 ready for investment, Cramer suggested putting half of it to work this week and waiting to see what happens.

Retirement-focused investors should look for high-quality stocks with healthy, growing dividends instead of bonds, Cramer advised, suggesting low-cost index funds as a good start.

"There will come a time when Treasurys make sense as an investment for people other than the very oldest viewers," he said. "But at the moment, I still think a risk-free 2.7 percent return [from the 10-year Treasury] is pretty crummy versus what you're likely to get from an index fund."

As for individual stocks, the "Mad Money" host couldn't help but zoom in on the hustle and bustle around Apple ahead of its Thursday earnings report.

Bearish iPhone sales forecasts have plagued Apple's stock in the weeks leading up to the report, all but setting the stock up to "fail" on Thursday, Cramer said.

"I don't know what Apple will report. I don't know what it's going to say. I just don't want people to flee from this stock and then not be able to get back in when it turns out the new products have legs and the service revenue stream becomes huge," he said.

"When Apple goes down, it takes the stocks of all its suppliers with it," the "Mad Money" host added. "No need to buy those until you see the whites of Apple's eyes."

Cramer also rattled off how investors should interpret market sectors other than technology: wait for the oil stocks to decline; let the drug stocks shake out weaker hands; hope for weakness in the "best-in-show" bank stocks.

If shares of the banks, which benefit from rising interest rates, happen to decline by the end of the week, Cramer said they are the best buys by far thanks to their relative cheapness.

"The bottom line? I am urging you to be ready for more volatility. Understand that you can trade some of these big techs all you want," the "Mad Money" host concluded. "My take? You need to own stocks like Apple. Don't trade them, but keep in mind that you may need to take some short-term pain before you get some long-term gain."

WATCH: Cramer's 'down day' strategy

Cramer: Use the earnings 'damage' to your advantage this week

Disclosure: Cramer's charitable trust owns shares of Apple.

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