Five Stock Picks for the End of Chaos

This column was originally published on RealMoney on Feb. 28 at 7:24 a.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

On the first day, chaos. Pure chaos. Tough to even get prices. That was 2001 and 1987 and, now, yesterday. Computer malfunctions, overwhelming short-selling from ETFs and derivatives gone awry obscure the battlefield totally.

On the second day, we get some order. Let's see: bonds up (rates down), gold cracked, copper down, perhaps a slowdown? So let's look at the slowdown stocks and see if there were any dislocations.

In fact, they're right in the Dow stocks, which seemed to take it on the chin from some derivative pressure and from some mistaken prices that made it so buyers couldn't get down fast enough to meet sellers.

To me, the five natural plays are:

• Altria (MO Quote), which is now yielding far better than Treasuries and has taken out all of the fluff from the guessing of the restructuring
• Procter & Gamble (PG Quote), which just gave up 3 hard-earned points
• AT&T (T Quote), which got back to 4% yield yesterday (and much better after tax)
• Coca-Cola (KO Quote), because we just got a series of upgrades predicated on the possibility of a real turn in that buyback giant
• Exxon (XOM Quote), which is the most defensive oil and quickly gave up a move that had taken months to complete, a 3-point throwback.

We know, from the just-completed quarters, that all five of these stocks delivered solid results with good outlooks.

None of these stocks should have been down as much as they were. The problem, of course, is that I bet they all open up.

That's problematic. The history of big up days after big down days on a percentage basis is pretty decent, but the history of big down days on a point basis and then nice follow-through is more mixed. In other words, the appearance of a crash generates flipping by those who bought at the bottom yesterday and selling by those who conclude that this whole business is too risky.

But this selloff did make the cover of The New York Times, always a sign that we are late in it, although only in one column. When we were at the hedge fund, a two-column headline on the top of the Times was often all we needed to start buying.

Compounding things is that we probably gave up a percentage point and a half more than we should have because of computer errors, so it makes sense, with Europe stable, that we open up. I would do this with these end-of-chaos stocks. I would not buy them at the opening if they are up. I would just say, "Oops, didn't buy the chaos, missed them."