Defensive stocks in a crummy market

What happens when the stock market gets ugly and people start panicking? Once the logic prevails, investors gravitate toward defensive stocks. These are generally the ones you eat, drink, and smoke, or the drugs you need as well as the personal care products you use. Here are four of the top picks from my 17 defensive stocks, which are performing far better than the market today. These stocks have the lowest P/E ratios and the most stable income streams (in alphabetical order):

• Altria (NYSE: MO) ($67.83; -$0.44; -0.6%) has a 14 P/E ratio and a 4.4% dividend yield. This was also one of Cramer's TOP 2007 PICKS, but for different reasons.
• Anheuser-Busch (NYSE: BUD) ($49.92; +$0.20; +0.4%)as the beer drinkers play -- don't people drink more beer when they are stressed? The 18.9 P/E and the 2.7% dividend yield are better than most beverage plays.
• ConAgra Foods (NYSE: CAG) ($25.53; -$0.04; -0.15%) has a 16+ P/E and its 2.8% dividend yield is higher than most food suppliers.
• Johnson & Johnson (NYSE: JNJ) ($61.76; +$0.10; +0.2%) as one of the more beaten up drug and medical names, plus the personal care products angle. The 17 P/E and the 2.7% dividend yield aren't going to kill you.

We are now in the perfect storm for a rate cut after the jobs numbers this morning posted the first drop in four years. Why does the phrase "Be careful what you wish for ..." keep ringing in my ears for all those who wished for a employment poor report so it would compel the Fed into a rate cut. Probably because the DJIA is down over 200 points today -- all of a sudden the weak data is too weak for comfort levels.

There are always other choices in smaller cap names, but investor mentality tends to go for the strength in numbers. Small caps may also not be familiar enough and so most tend to flock to the go-to names that are more established, hence defensive.

Jon C. Ogg produces the Special Situation Investing Nesletter and he does not own securities in the companies he covers.