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• CNBC's Jim Cramer uses a story about a real-life bear encounter to illustrate how investors should approach the stock market's bearish moves.

• Outsmarting the bear can produce better returns than running away from it, the "Mad Money" host says.

In his decades of investing, CNBC's Jim Cramer hasn't just seen bear markets like the one that dragged stocks lower on Wednesday — he's also encountered a real bear.

Once, when the former hedge fund manager was on a hike, a bear found its way to his tent. Instead of running, Cramer stood his ground and used what he had. He put some M&Ms in a can of Spam to bait the bear, then doused them in Tabasco sauce and ran. The distraction worked, and when the bear tasted the red-hot Tabasco, it ran off.

"Now, I'm not saying you can outrun a bear. You can't. I'm not saying you should let him eat all your food and then hope he doesn't turn on you," Cramer said. "I am saying that you have to be clever. You have to think, 'OK, I'm not going to panic, I'm going to use my head and I'm going to outsmart the darned bear.'"

The same principle can apply to the stock market, the "Mad Money" host said. Here are his three tips for investors to protect their portfolios from being mauled:

1. Focus on individual companies

The mere statement that a stock is "in bear market territory" doesn't actually affect the fundamentals of the underlying company, Cramer explained.

"If you examine individual companies and think about what represents value, you can do better than you think," he said, calling attention to the stock of Home Depot, HD which managed to recover during Wednesday's trading session.

Shares of Home Depot plunged Tuesday after the company's third-quarter earnings report . Investors, concerned about how the home improvement retailer would fare amid rising interest rates, sold the stock close to its year-to-date lows.

"Today, ... shareholders outran the bear and Home Depot's stock went higher. Did the fortunes of the company change in 24 hours? Not at all," Cramer said. "So, first, recognize that even in a bear market, [you] can trick the ursine attacker by picking up stock in great American companies with fabulous balance sheets that will do well if the Fed decides to take a break from tightening."

2. Find the collateral damage

The bears have a "two-pronged fork" that can decimate stock gains, Cramer said. One prong is President Donald Trump tariffs, which are set to rise to 25 percent at the end of 2018, and the other represents the Fed's rate hikes , which aim to slow economic activity and taper inflation.