Jim Cramer hosted his monthly members-only club call for his Action Alerts Plus investing club.
The call centered around the rules that investors make when it comes to earnings season. He gave listeners five rules to abide by.
His first rule centered on the mistakes that investors make when listening to earnings calls.
Here's what Cramer had to say to members:
Listen to the entire conference call before passing judgment on a company. Let's take a look at Kohl's (KSS - Get Report) for an example, When the company reported its fourth quarter earnings last March it was better than expected with a solid top and bottom line beat and in line comparable store sales gains.
Deservedly so, the initial reaction to the print was positive and the stock showed a solid gain when the market opened. But then , as we have seen happen plenty of times with this stock, the early rally began to show cracks.
That's because management guided for first quarter comparable sales to be at the low end of the range because of a soft February and the stock repealed a lot of its gains even as every retailer, and I mean literally every retailer, had a soft February because the weather was so atrocious all over the country.
When you hear "soft" and "February" though you don't relate it to other stocks. You don't bother to reason. You just sell.