Wall Street saw the biggest decline yesterday since the Great Depression in 1929. Financial giants AIG, Merrill Lynch and Lehman Brothers all tanked. AIG(AIG) which was trading in the $20 range Thursday of last week is now at $2 and change. Merrill Lynch(MER) is being bought by Bank of America (BAC) for $80 billion in stock. Lehman Brothers (LEH) filed for chapter 11 bankruptcy protection.

Although all this news sounds bad, and it is for these companies, it is important to remember that if you have money in these banks, you aren’t going to lose it. Accounts up to $100k are insured by the FDIC and you will get your money if the bank closes its doors. The worst thing anyone can do in this situation is panic. Panic only worsens an already bad situation.

You might be thinking “woulda shoulda coulda” at this point in regards to shorting these institutions but there’s no way you really could have forseen these drastic changes. Instead, try to focus on other sectors that do well in economic downturns. You also have to look at those financials that are doing well and that haven’t been exposed to the same factors that have affected these other banks. Wells Fargo (WFC) is still a solid performer and I recommend them here, especially on any drop.

Ironically, the entertainment industry thrives during times of economic crisis because people want to escape their real lives for a bit.

Some stocks to consider:

• NFLX - Netflix still has a good business model and their online offerings continue to grow. With their set-top box you can deliver dvd quality movies right to your TV. There’s resistance at $30 so this is a good place to set up a core position, buy on a dip below $28 with a price target around $37 based on projected earnings.
• MVL - Marvel Inc, looks strong here. Their new franchises are proving successful and you should buy this on any dip. The recent breakout from $35 resistance means it’s heading higher and I see a $46 target over the next 6 months if their earnings keep up.
• DIS - Disney continues to perform well in its sector. It has a decent dividend but slower growth than I like. With Pixar under Disney control now, they have a solid production company making excellent animated films and can focus on other aspects of their business.

I am sure there are other stocks out there that meet similar criteria, these are just a few on my radar. In downturns like this I don’t like to hastily jump on a stock. Doing as much research as you can will help mitigate your risk and create a better profit margin potential. The other option of course is to sit on the sidelines and wait for the right opportunities, but don’t try to spot bottoms, it’s nearly impossible and past performance isn’t any indicator of future performance. Earnings are a better way to look at things and give you a clearer picture of how a company is doing.

I own shares of WFC, AAPL.