Buy Baidu (BIDU)   4 comments

I broke down and added Baidu (BIDU) at $157.02 to my IRA (my daily portfolio). Here are the resons why:

1. It was trading near the bottom of it’s range (around $155). I missed the dip it had earlier, and it was bouncing up. Still, it remains inside it’s upward moving channels, where it has been since July.

2. I need some foreign exposure in my portfolio, and Baidu, “the Chinese Google”, in my opinion, is the best and possibly only Chinese stock to own. Too many Chinese companies lack transparency in their operations, but a search engine is hard to hide.

3. Baidu’s financials are clean, with $1.2 billion in levered free cash flow, plus a 40% profit margin (by comparison, Google pulls almost 22%).

4. China’s internet market is still growing, as evidenced by Baidu’s 38% revenue growth in the year-over-year June quarter. Speaking of the June quarter, Baidu reports their 3rd quarter earnings October 29th, one of the few things I don’t like about buying it now.

5. Speaking of revenue growth, Baidu’s PEG ratio is at 1.5. A little higher than I normally like, except it is actually a little light when compared with such growth engines as Netflix (10.4) and Tesla (16.9).

Overall, this is really more of a portfolio move than an “I love Baidu” move. Baidu just happened to be the right stock (Chinese), in the right place (low in it’s trading range), doing the right thing (growing in China), at the right time (now, when I was looking to put some cash to work in my portfolio).


Posted October 22, 2013 by edmcgon in Portfolio Moves

4 responses to “Buy Baidu (BIDU)

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  1. Its had one heck of a run up since June, hope it continues to run for you. A couple years ago I bought and sold this several times over 18 -24 months and made better than average dollars. Good luck.

  2. Ed – good luck with Baidu. They have run up a lot of late, but I agree they are in a good space. I do not agree that they are the best and possibly only Chinese stock to own. I have done very very well with RDA, CYOU and GA.

    • Marshall,
      Speaking as someone who invested in a lot of smaller Chinese companies several years ago, most of the ones I bought then are now floundering, because of questions about their accounting practices. Chinese stock investing is filled with landmines for investors, and I would suggest any investor should tread carefully.

      I am not commenting on your specific holdings. But anyone buying Chinese stocks should do extra due diligence on them. That is all I meant by that.

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