3 Stocks I'm Buying After the Market Sell-Off

On Feb. 8, both the S&P 500 and Dow Jones Industrial Average reached a recent bottom, having fallen more than 10% from the market peak less than two weeks prior. Since then, both indexes have recovered about half of their losses. But there are still some nice deals to be found in individual stocks, and I plan to take advantage of that.

Three stocks that I've identified are already prominent holdings in my portfolio: Alphabet Inc (NASDAQ: GOOGL)(NASDAQ: GOOG), Pattern Energy Group Inc (NASDAQ: PEGI), and Starbucks Corporation (NASDAQ: SBUX). Not only are these top-notch companies, but they're still on sale.

Finally buying more of this big winner

Since I last bought shares in 2014, Alphabet's stock price has nearly doubled -- about twice the gains of the market over the same period:

In short, it has been a big winner in my portfolio. But over the past four years, I've contributed a lot of new money that I've invested in other companies, and that's kept Alphabet a paltry 2% of my portfolio. Buying more has been a long time coming, and the recent market sell-off has created a nice opportunity.

There is more to the recent stock price drop than just the market sell-off, as the company is spending more money to acquire traffic than it has in the past. But even with the risk that profit margin gets a bit squeezed, few companies have the kind of optionality that Alphabet does -- and that should keep it innovative, relevant, and growing profits for many years to come. The fact that I can pay a discount to its recent stock price high is icing on the cake.

Pounding the table on Starbucks

As with Alphabet, I've also owned Starbucks for years, while not buying more (outside dividend reinvestments) since late 2013. And also like Alphabet, my Starbucks investment is a very small fraction of my portfolio. The big difference? The market has, to some extent, lost faith in Starbucks' ability to grow, particularly since growth in its U.S. cafes has slowed sharply over the past year. That's helped push its stock price down more than 12% from the peak in June 2017.

So why buy Starbucks now? Wall Street is fearful of slowing U.S. growth, with comps only up 2% last quarter, but the coffee giant is in the early stages of its next big growth push. The company recently made a move to acquire all of its mainland Chinese operations, taking over from a joint venture partner. This is a significant step; management is counting on China to become the company's biggest market in the future. With around 3,100 restaurants in China at year-end versus over 13,000 in the U.S., I think investors are underestimating the company's prospects by a wide margin. After all, the Chinese middle class is on track to be bigger than the entire U.S. population.

With shares trading for around 17 times the company's guidance for 2018 earnings, I plan to buy Starbucks while the market is underestimating it.

The future of energy is on sale, too

Pattern Energy Group is a much more recent addition to my portfolio, but it's one that I'm incredibly excited about. Pattern Energy is an independent energy company, owning stakes in 20 wind energy production facilities in North and South America with 3.8 GW of capacity. The company has aggressive plans to grow its power capacity, too. With access to a pipeline of 10-plus gigawatts of planned new wind and solar assets through its privately held affiliate company, Pattern Development, Pattern Energy is in a unique position to grow its cash flow for many years to come.

The reality is that wind and solar are competitive with fossil fuels today, and prices are still falling. Factor in major advances in energy storage, and the long-term prospects for Pattern Energy look very good.

But the market is not so convinced. Since Pattern Energy and its development peers generally require a substantial amount of debt to fund new projects, changes in the federal tax code could actually harm Pattern's ability to get capital; at least that's what the market thinks, since this has played a big role in the stock price's falling 27% since late last year. This has simultaneously affected the company's ability to issue stock to raise capital, as the dividend yield is nearly 9% now and would make it very difficult to get decent returns without cutting the payout.

But I think the market is underestimating CEO Mike Garland and his team, which has decades of experience developing renewable projects across every kind of environment. There will likely be some short-term uncertainty as the impact of the new tax law on tax equity investors plays out. But looking at the bigger picture, the demand for renewables and the low-cost advantage they have over fossil fuels should bode very well for Pattern Energy.

There's some risk that capital is harder to come by than management expects and Pattern Energy's growth stalls. If that happens, the stock price could fall even more. But it's a risk I'm willing to take, as demand for renewable energy -- and at a cheaper price than fossil fuel power -- is likely to grow for potentially decades to come.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jason Hall owns shares of Alphabet (A shares), Pattern Energy Group, and Starbucks. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Starbucks. The Motley Fool has a disclosure policy.