Investors should focus on companies that can survive the economic downturn without help from the government and avoid "non-essential" companies that might not survive, CNBC's Jim Cramer said Monday.
"What you're looking for, I would say, are companies that ... have the ability to survive no matter what because there's demand for their products," Cramer said on "Squawk on the Street." "And I think that's the way you want to analyze a stock. You want to say essential, non-essential."
The coronavirus pandemic has led to a steep cut in demand for travel and widespread closures of bars and restaurants in major cities around the country. Fears of a recession have risen, with Goldman Sachs cutting its forecast for U.S. growth to 0% in the first quarter and -5% in the second quarter.
Markets plunged on Monday morning, with trading halted shortly after the opening bell because the S&P 500 dropped more than 7% and triggered a circuit breaker. Stocks extended their losses once trading resumed.
Cramer said investors should look for companies that have the cash to withstand the economic slowdown.
"Your first checkdown is to look for companies that have a lot of cash that are going to be needed after the illness is conquered. Your second one is to say, all right, which companies have good dividends and decent cash flows that I think can get through this," Cramer said.
"And then your third one is to say I don't want any of these companies because they could be cash strapped," he added.
He said that some industries, such as travel, that may receive government help may still be unattractive for investors.
"We need an airline system. Nobody's denying that. But do we need an airline system where the companies make a lot of money? Well, that's not what the president's thinking about. And I think we have to think what company without help from the government is going to get through to the other side, and that is probably going to be a buy," Cramer said.
Other industries that are less essential may be in an even worse position.
"Darden reports this week, I mean that's a tougher one. Do we need Olive Gardens? I think we need those people to have jobs who work there," Cramer said.