Gameplan: Earnings Defense

Earnings season is about to kick off, but don’t get too excited, Cramer warned. There aren't many bright spots out there.

For the next five or so weeks the odds will not be in your favor, according to the Mad Money host. If you want to have a shot of gaining an earnings edge, the best thing to do is look for trends that have occurred intra-quarter, meaning between January and now, because estimates are set when a company previously reports. But of all the sectors in the S&P 500, there is only a pair that Cramer thinks have the potential to produce earnings surprises: steel and agriculture.

The former has been rallying thanks, in no small part, to supply shortages. Cramer recommended U.S. Steel at Penn State this week, and he thinks it could continue to go higher, but he would only recommend buying it on weakness.

Agriculture is a complex that reacts to surprising numbers – just look at what happened when Monsanto lifted its outlook Tuesday. Monday’s crop report could cause initial weakness in the group if corn plantings come in weak, but Cramer would use that as an opportunity to buy Potash , the fertilizer company with the lowest estimates relative to what the Street is looking for.

Cramer expects the drug companies to experience some bumps, but they will be related to the weak dollar most likely, and in that case only Schering-Plough is worth a trade for its overseas exposure. Food stocks could go higher, too, if they take their cue from General Mills’ earnings this week.

But that’s about it. Don’t hold your breath for anything positive from the financials or tech (other than maybe Apple ). Looking for something out of machinery? Cramer thinks those stocks are too tied to the collapse of the domestic automakers. Telecommunications? Nice yield support but the price wars and aggressive spending aren’t helping anybody. Retail is an “unmitigated disaster,” the minerals are held hostage to problems in China. Oil is tough too, as refineries have been a nightmare. Natural gas looks good, but most of those stocks have already raised numbers. Cramer only trusts Chesapeake to go higher and that’s because of its secondary.

With only two groups that could really nail their estimates, Cramer thinks defense replaces optimism as the watchword for this earnings season. Watch the videoto see him answer viewer questions on retail, shorting the market, and where we are in the business cycle.

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