03/25 - transfer in 300,000 from the Pfizer portfolio. BIDU stock is at $84.85, S & P 500 is 1,557
03/25 - 302,740 - ($85.33) RSI 35.0
04/02 - 323,085 - ($88.12) RSI 46.6
04/05 - 293,125 - ($83.59) RSI 34.8, lowest stock close and valuation from inception
04/12 - 337,805 - ($90.62) RSI 56.9
04/22 - 306,925 - ($85.66) RSI 42.2
04/25 - 349,725 - ($92.34) RSI 60.2, highest stock close and valuation from inception
04/26 - 305,205 - ($85.02) RSI 44.2, Q1-13 earnings and 2013 outlook disappoint
05/03 - 300,285 - ($84.51) RSI 43.5
Up 0.1%. Portfolio gain to date
Dn 0.4%. BIDU stock from inception
Up 3.7%. S & P 500 from inception of investment (1,557 to 1,614)
Note: This is one of the fastest-growing companies its size in the world but with a sharp one-year slowdown in 2013 due to massive R & D expenses this year. The recent earnings history and downwardly-revised consensus expectations for this dominant Chinese search engine are as follows:
$1.53 in 2010 (actual)
$3.02 in 2011 (actual)
$4.79 in 2012 (actual)
$5.03 in 2013 (consensus - 05% expected annual growth)
$6.26 in 2014 (consensus - 23% expected annual growth)
$8.05 in 2015 (consensus - 29% expected annual growth)
And yet even with this torrid growth, BIDU which is stll near not far from a 30-month closing low has only the same 13 PE relative to 2014 expectations that Pfizer has. This makes little sense to me even considering that BIDU earnings are slowing.
This is about as compelling a buy as I've ever seen and in the fullness of time I expect to earn a small fortune here. BIDU by the way was a $166 number in mid-2011 when earnings were only $3.02 a share versus an expected $5.41 this year. Two years ago, the major competitor was formidable GOOG but onerous Chinese government restrictions are chasing that company out of China and the major competitor today is Qihoo 360 Technologies, a Chinese firm only 1/8 BIDU's size.
BIDU's expected earnings growth in 2013 is expected to be pretty paltry because they are massively ramping up R & D this one year. But beyond 2013,, with revenue growth still expected to be over 30% a year, R & D is expected to grow much more modestly than 2013's expected EIGHTY percent. Current consensus quarterly earnings comparisons for 2013 and the first half of 2014 are as follows:
$0.95 in Q1-13 vs. $0.85 in Q1-12 (up 12%). Actual
$1.25 in Q2-13 vs. $1.24 in Q2-12 (up 01%). Consensus
$1.40 in Q3-13 vs. $1.37 in Q3-12 (up 02%). Consensus
$1.43 in Q4-13 vs. $1.33 in Q4-12 (up 08%). Consensus
$1.30 in Q1-14 vs. $0.95 in Q1-13 (up 37%). Consensus
$1.65 in Q2-14 vs. $1.25 in Q2-13 (up 32%). Consensus
I can assure you that when the massive increases in R & D end and the company starts showing earnings growth of over 30% a year, you won't be seeing forward PE's such as the current 13.5.
The consensus earnings estmitates are up-to-the-minute and can be found on Yahoo research. Expected earnings for the year 2013 are well below norms because the company is dramatically ramping up R & D expecnses this year to improve its mobile computing platforms and to distance itself from its chief rival which is only 1/8 BIDU's size and which is NOT increasing R & D very much this year.
But make no mistake about it - revenues this year are going up by about FORTY percent and the only reason why earnings growth is lagging badly is that R & D expenses are going up by twice that percentage. Indeed, in Q1-13 with revenues up 42% year-over year ($677M inQ1-12 and $961M in Q1-13), R & D soared by EIGHTY THREE percent.
How many companies this size do you know of that are growing reventues by FORTY percent a year and that is expected to still have over thirty percent revenues growth in both 2014 and 2015? In those two years, the bottom line is expected to grow by an average of over 25% a year and yet the PE relative to forward 2014 earnings expectations is a mere 13.5. In other words, the forward PEG ratio is an insanely low 0.55 - and that's just unheard-of - especially for such a tiorrid, dominant growth company.
In my half-century in the stock market, I have never seen fundamentals and valuation as competling as BIDU right now. I expect that in the fullness of time, this will be biggest money-maker ever.