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Where to Hide During the Market Carnage

Telcos, pharmas and some media stocks present investment opportunities now, according to Fergus O'Sullivan, managing director at Morgan Stanley.

O'Sullivan told CNBC he sees some signs of differentiation coming into stocks.

He suggests investors look for companies with robust dividends, strong balance sheets and strong cash generation.

Investors should be patient regarding market direction; wait for signs that deleveraging is very much in its advanced stages; and look out for a sign of a trough in US house prices or earnings, he said.

Recommendations:

GlaxoSmithKline, BSkyB and Vodafone are O'Sullivan's top European picks.

"Pharmas had a comparatively strong year," O'Sullivan said.

He recommends going long on GlaxoSmithKline stock and short AstraZeneca.

"There are some early cyclical sectors like media that are beginning to present some opportunity," O'Sullivan said.

BSkyB's stock has underperformed the media sector year-to-date, and is down 40 percent -- which is "wholly inappropriate" considering the "stocky nature of the group's revenues," he believes.

"I just think the way that this particular baby has been chucked out with the media-sector bath water this year is inappropriate," he said.

"Vodafone has had an incredibly strong run just in the last few days or so, but so has the sector," O'Sullivan said.

"We think, given the underperformance of the stock year-to-date, it still has further upside."

Vodafone's new strategy and its expansion plan, as well as its focus on the dividend, makes it a very good value, he explains.

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