Jim Cramer’s 5 rules for earnings season

Jim Cramer explains how investors can prepare for earnings season

On Tuesday, CNBC’s Jim Cramer went over a list of do’s and don’ts for investors ahead of a busy earnings spell.

The upcoming earnings season, which kicks off this week, features quarterly updates from the country’s biggest banks, manufacturers and airlines.

Here are five rules for investors to remember, according to Cramer:

  1. Don’t succumb to instant analysis. Investing is not an urgent act.
  2. The first move is often the wrong move. This means that investors should not base their investment judgments solely on the number of companies performing relative to consensus analyst estimates.
  3. Don’t trust the tape. In other words, investors should not buy stocks unless they themselves have done their homework to research the company.
  4. Read conference calls carefully. The question and answer part is particularly important because it shows if analysts are really satisfied with the quarter.
  5. Make a thoughtful decision if you buy. Ask yourself if Wall Street misread the quarter – which could translate into a buying opportunity.

Cramer added that a chief executive’s willingness to repurchase shares after the company announced its earnings is another sign that investors should buy the shares themselves.

Above all, investors need to be cautious and measured, he said. “It’s a tortoise and hare situation, so take it easy.”

Jim Cramer reviews his 5 rules for earnings season

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