On Tuesday the USDA confirmed rumors that mad cow disease has been found in California, and stock markets were quick to react.

Mad cow disease, or bovine spongiform encephalopathy, comes up fairly often. This will be the fourth California case since 2003, and there were 29 reported incidents across the U.S. in 2011 -- but it's always a big to-do.

According to officials, the diagnosed dairy cow did not enter the food chain and has been destroyed by state authorities. And the disease is not transferable through milk, so for all intents and purposes, things should be OK.

Markets felt otherwise. Pilgrim's Pride (NYSE: PPC), the world's second-largest poultry company, saw its stock price climb 7.22% on the possibility consumers will (at least temporarily) switch up their meat consumption.

Tyson Foods (NYSE: TSN) rose 1.53%. Cattle futures dropped the most in 11 months in Chicago (via Bloomberg), and "the world's largest beef producer, Brazil's JBS SA (JBSS3), fell by as much as 5.2% before closing 0.3% lower in Sao Paulo."

Business section: Investing ideas
Market reactions to news events tend to be overblown, and recovery eventually occurs. After all, do you still eat spinach after the big scare some years ago, or pork after the swine flu incident, or meat at all after Oprah announced she was going vegan for a week? Let's not even start with "pink slime."

So now the meat markets are in panic/excitement mode. Do you think it's the proper reaction, or is it due for a correction? If so, should you be buying or shorting any of the names below?

Price data from April 24, 2012. (Click here to access free, interactive tools to analyze these ideas.)

1. BRF-Brasil Foods (Nasdaq: BRFS): Produces and sells poultry, pork, beef cuts, milk, dairy products, and processed food products in Brazil and internationally. The company has a market cap of $16.58 billion. Tuesday's closing price was $19 after a market change of 2.76%. The stock has lost 4.9% over the last year.

2. Hormel Foods Corp. (NYSE: HRL): Produces and markets various meat and food products in the United States and internationally. The company has a market cap of $7.49 billion. Tuesday's closing price was $28.38 after a market change of 0.6%. The stock has relatively low correlation to the market (beta of 0.46), which may be appealing to risk-averse investors. The stock has gained 2.12% over the last year.

3. Industrias Bachoco S.A.B.  de C.V.: Operates as a poultry producer in Mexico. The company has a market cap of $1.0 billion. Tuesday's closing price was $20.05 after a market change of 0.25%. The stock has lost 28.55% over the last year.

4. Pilgrim's Pride: Produces, processes, markets, and distributes fresh and frozen chicken products to retailers, distributors, and food service operators primarily in the United States. The company has a market cap of $528.05 million. Tuesday's closing price was $7.13 after a market change of 7.22%. The stock is a short-squeeze candidate, with a short float at 9.65% (equivalent to 5.23 days of average volume). The stock has had a couple of great days, gaining 5.16% over the last week.

5. Smithfield Foods (NYSE: SFD): Engages in the production and marketing of fresh meat and packaged meat products in the United States and internationally. The company has a market cap of $3.33 billion. Tuesday's closing price was $20.66 after a market change of 1.87%. The stock is a short-squeeze candidate, with a short float at 9.31% (equivalent to 7.1 days of average volume). The stock has lost 11.44% over the last year.

6. Tyson Foods: Engages in the production, distribution, and marketing of chicken, beef, pork, and prepared food products, as well as related allied products worldwide. The company has a market cap of $6.62 billion. Tuesday's closing price was $17.93 after a market change of 1.53%. The stock has lost 6.03% over the last year.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.