Baidu: My Top China Internet Stock

November 17, 2009

Welcome to another edition of Stock of the Week, a FREE eletter sent out each Tuesday containing my in-depth analysis on the stocks that matter to you most—with no mysteries and no strings attached. (View complete Stock of the Week archive here.)

Last week, I mentioned my favorite China energy stock to buy and that prompted a lot of questions asking for another pick in this booming region. That’s easy! For those of you who have been reading this weekly eletter or my market blog, it’s no secret that I am very bullish on a number of stocks in China right now.

But out of all of the standout companies in this emerging market, my favorite Chinese internet stock really stands alone. I mentioned this stock a few months ago, but today I’ll give you an in-depth look at this pick with updated sales and earnings numbers. And more importantly, I’ll also show you a proven system of identifying market-beating stocks so you can fill your portfolio with winners like this one!

The Best and the Worst Picks

I want to take a moment and thank all of you who have written me to ask about specific stocks (drop me a line at stocks@navelliergrowth.com). We’ve covered a variety of companies in many different sectors, and I hope you’ve found these recommendations useful. Though I can’t cover every stock idea that’s sent in, I always try to talk about the most popular companies each week.

We’ve amassed quite a list of stocks so in addition to today’s pick, I want to take a quick look at some of our previous buys and check to see if they’re still good for new money. I also want to take a peek at some of the stocks I’ve told you to avoid to see if there’s any reason to change our original recommendations. Let’s get right to it:

Baidu (BIDU) Is Still My Top China Internet stock

Back on September 1, I sent out my weekly eletter with a recommendation to buy Baidu (BIDU). And more than two months later, I remain convinced that this pick is still the #1 Chinese internet company on Wall Street right now.

Since my original recommendation, shares of BIDU have soared +38%, compared with an uptick of +11% in the S&P 500 across the same period. That’s beating the market by about $4-to-$1. I expect this surge is only the beginning of the impressive returns BIDU will deliver investors in the months ahead.

How can I be so sure? Well, at the end of October this Chinese company proved how powerful it was with a standout earnings report. Baidu’s third-quarter earnings jumped 42% as the Chinese Internet company continued to gain traction with its new advertising system. Specifically, BIDU reported earnings of $72.2 million or $2.07 per American depositary share, compared with earnings of just $1.46 a year earlier. Analysts were expecting earnings of $1.83, meaning this stock posted a very impressive 13% surprise. Additionally, revenue surged 39% to $187.3 million.

Looking forward, the prospects look even brighter. Despite already being the dominant search provider for China’s booming population of Internet users, the company continues to aggressively pursue continued growth with a new online marketing database called Phoenix Nest.

Because of this strength, Baidu is one of the top stocks on my Blue Chip Growth Buy List right now and is helping my subscribers close out what I expect to be another year of beating the market $6-to-$1. (Sign up today for a six-month trial of Blue Chip Growth backed by my 100% money-back guarantee!)

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