A gain of 12.18% in 2018 for shares of Baidu, Inc. (BIDU) has been helped by healthy institutional accumulation (buying). Baidu has been one of the best performing stocks over the past decade, with monster sales and earnings growth. Taking a look at how the shares have been trading over the past year, the gains Baidu has seen have shown share prices increasing alongside volume increases. Given activity like that, it should come as no surprise that the stock has vaulted higher over that period.
With Chinese internet search usage growing year after year, Baidu is a key beneficiary of that growth. Not only that, one of the biggest factors used to identify strong stocks for the long-term is to look simply at supply and demand – and Baidu stock has clearly been in demand. Betting on growing stocks with great fundamentals and increasing institutional activity can be worthwhile for long-term shareholders.
For Macro Analytics for Professionals (MAP), the strongest indicator of positive price momentum is obtained by measuring potential institutional accumulation. In 2017, Baidu stock logged 17 of these rare signals. Since the first bullish signal in 2017 (Feb. 8), Baidu has returned +49.82%. Moreover, the stock has seen five additional bullish signals in 2018. We want to see bullish activity in the shares alongside solid fundamentals. This indicates that demand for the stock should increase.
In the chart below, Baidu stock's price gains are accompanied by increasing accumulation. Shares are sitting right at previous all-time high levels:
Courtesy of TradingView
MAP's process focuses on identifying companies with healthy fundamentals accompanied by outsized, unusual institutional activity to try and measure potential accumulation/distribution at the single-stock level. By studying these data points, we can hypothesize which equities institutions are trafficking in and marry this information with fundamentally sound companies. We want the odds on our side when looking for the highest-quality stocks.
When deciding on the strongest candidate for long-term growth, we consider many technical areas important to success. A few of these for Baidu are as follows:
On top of a great technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Baidu has solid earnings and sales growth rates:
- One-year sales growth rate: +18.17%
- One-year EPS growth rate: +20%
- Three-year EPS growth rate: +48.05%
Baidu checks the box on strong technicals and fundamental, while recently showing bullish institutional momentum. We believe that Baidu's recent earnings report on April 26, 2018, supports the fundamental narrative for a potential long-term position. Baidu shares have been powering higher for the past year, and with multiple unusual institutional activity signals, it could be setting up for a move to the upside. All of this points to further long-term bullish action for the stock.
The Bottom Line
Baidu represents a potential buying opportunity for the long-term investor. Given the recent breakout to new 52-week highs, solid earnings beat and guide, and multiple recent bullish institutional accumulation signals, this stock could be worth a spot in a growth portfolio.
To learn more about MAP’s institutional signals please visit our "About Us" page.
Disclosure: The author holds a long position in Baidu shares at the time of publication.