Featured Trades: (BAIDU), (GOOG)
4) Make Another Visit to the Trough for Baidu. Just like buying a drink for an old flame when passing through town, there is no better feeling than revisiting winning trades. I first recommended Baidu (BIDU) at split adjusted $12.5 in December, 2008 (click here for the call). It hit $88 earlier this month, a 700% gain. The current bout of global equity market angst has since knocked 11% off of the shares, and there may still be more downside to go. It may be worth making another visit to the trough. Baidu has incredible momentum selling into the world’s fastest growing market for online services, where it has a 65% market share for Chinese language paid search. It has recently expanded into Japan with a powerful Japanese language search engine there. Baidu also brings in peripheral revenues through community based e-commerce, communication, and entertainment. YOY revenues are growing at a 70% rate. No surprise then that Baidu is a favorite trading vehicle for the BSD hedge funds. It is benefiting hugely from the Chinese government’s onslaught on rival Google. Sure, a PE multiple of 83 sounds rich, compared to Google’s 20, but how much should you pay for a hyper growth company in a country where Q2 GDP came in at 10.3%? Add Baidu to your buy on meltdowns list to get a high beta play in the Middle Kingdom.