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EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stock Under $10 that he thinks could potentially double or triple in the next 6 to 12-months. See what he's trading today with a 14-day FREE pass.

Jim Cramer: How to Play a Selloff

I think anything more than 25x earnings, or $75, you take a pass. Remember, this is how you use a sale not how you let it use you. Plus, when it gets to $75, I wouldn't even put on a full position. Much better to buy half and then wait, say, until it sells at 22x earnings to buy more and then 20x earnings to buy the rest.

Sure, if the growth rate suddenly slows you are going to lose a lot of money. But you will be buying it at a cheap rate historically and that's the correct prism for higher-growth investing.

You can do this exercise with a whole bunch of companies. I am only picking on Whole Foods because the quarter was everything you could ever want out of a company except for one that is so expensive that nothing could ever be enough.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

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