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Tickers in this Article: BIDU, GOOG, YHOO, SOHU
If you've had your fill of the North American stock markets after what happened in 2008, you might consider diversifying by going global, if you haven't already. The massive still-developing market of China beckons with opportunities. Search-engine company Baidu Inc. (Nasdaq:BIDU), often called the "Chinese Google" (Nasdaq:GOOG), has intriguing possibilities.

The Chinese Search
Why bother going out internationally to look for investments, when many of the world markets did as poorly or worse than the U.S. markets did? It's true the Chinese exchange - the Shanghai Composite - plunged 65%, and the nearby Hang Seng market of Hong Kong was off 48%, so these figures don't look much different than the S&P 500, the Dow or the Nasdaq. The difference is the potential for rebound in both the markets.

Even if U.S. markets rebound and American companies and the economy head upward, the potential for higher growth rates in China's companies and stocks is much greater. Baidu, for example, has seen its earnings more than double over the past two years. Contrast this with the tamer growth rates of its American counterparts: the fast-growing Google and Yahoo! (Nasdaq:YHOO), which is hoping for revival under Carol Bartz's new leadership, or even compare Baidu against its Chinese competitor, Sohu (Nasdaq:SOHU), and you will find that none are at the electric pace Baidu is.

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Home Country Advantage
Google is in China, too, but there they must play on Baidu's and Sohu's turf. The Chinese government actively assists the country's companies and economy. With the advantage Baidu and Sohu have in their own country, they can grow relatively unabated. Sohu is roughly half the size of Baidu, making Baidu clearly the leader with its dynamic management, financial wherewithal and higher growth. Whether or not Baidu becomes an "internet supermarket," something like a Chinese Yahoo! and a Chinese Google combined, it will still have the advantage of its high visibility and growing brand strength in its home country.

A Dynamic Search Result
Baidu has a market cap of just over $4 billion, and its stock price ranged from a high of 382 to as low as 100 last year, very much like what happened in the U.S. Keep in mind that when we cite the financials, international accounting may not always be as transparent as we'd like. Baidu's size, earnings and revenues are modest compared to Google, with Google's $100 billion market cap, or even Yahoo!, with its stripped-down $17 billion cap, but nine-year old Baidu is just starting to roll.

With earnings per share of $2.45 in 2007, a projected finish of $4.68 this year, and nearly $6 a share next year, this is a robust trend. With Baidu's annual revenue now at the quarter billion mark and income nearly $100 million, there is massive room for growth. Often cited is the Chinese population of 1.3 billion people, with a still huge untapped market for the search engine industry. As the economy grows, so does the access to computers for its people. This in turn will provide growth opportunities for whichever brand is most recognized - which spells big profit for Baidu.

The Search Uncovers Some Problems
Critics of the company point to the recent scandal with the pay-for-search pressure on Baidu, where some internet marketers are pressured to pay for ads or their search engine ranking is dropped. This is a problem that the management of Baidu supposedly is addressing, but it bears watching.

Also, there has been a recent crackdown on pornography, where the Chinese government vows to make all search engines stop linking to porn sites. This too, bears watching, especially in light of the reality that the Chinese economy and stock markets are subject to different regulations and constraints; most problematic would seem to be running afoul of the Chinese government. All these are considerations that should be kept in mind when investing in China.

The Fruits of the Search
So, with the skittish history of problems in the Chinese markets and economy, their newness to capitalism, all this measured against the promise of great growth, should you go global with Baidu or stay away? Certainly there is risk, some we've outlined above. However, Baidu is a great growth stock opportunity for both near- and long-term, so you might purchase it with a readiness to react quickly should there be any unfortunate news in the company, the Chinese economy, or its markets. But close watching and some savvy on the part of an investor here really can pay off.

To learn more about investing in this emerging market, be sure to read our related article Investing In China.

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