Cramer's 'Mad Money' Recap: The Expectations Game (Final)

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NEW YORK (TheStreet) -- "On Wall Street, we bet on the kid at the bottom of the class," Jim Cramer told the viewers of his "Mad Money" TV show Thursday.

He explained that while its counter-intuitive, investors often reward beaten- down companies that are making progress rather than the high-fliers that everyone simply expects will continue to do well.

Such was the case with Procter & Gamble (PG Quote), a stock which Cramer owns for his charitable trust, Action Alerts PLUS, and General Mills (GIS Quote). While both companies today announced positive forecasts, Procter rallied $2.28 a share by the close, while General Mills was down for most of the day, only eking out a gain of a few cents at the close.

Cramer explained that this phenomenon is all about managing expectations -- the difference between what Wall Street thinks will happen, versus what actually happens.

Cramer said Procter has been a serial disappointer, missing their numbers and lowering expectations. Of the 17 analysts covering the stock, only nine list the stock as a buy, with the remaining eight calling it a hold. So when Procter, a hated stock in Wall Street's eyes, delivered positive news, the stock soared.

Conversely, General Mills is a serial outperformer. Thirteen analysts rate General Mills a buy, with only five holds. So when the company beat its numbers, again, no one cared, said Cramer. He likened it to a kid who always gets "A's" in school, getting another "A." It's just expected, he said. Procter, on the other hand, has been a "D" student, and just gave us a "B-," offering hope that an "A" might be in the company's future.

Cramer said he's still behind Procter is poised to continue the trend of surprising investors and analysts alike. He said the weak U.S. dollar and falling natural gas prices will continue to boost the company's performance.