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Should You Consider Investing in Baidu (BIDU)?

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Ariel Investments, an investment management firm, published its "Ariel International & Ariel Global Fund" third-quarter 2021 investor letter – a copy of which can be downloaded here. Ariel International Fund returned -4.55% in the third quarter, trailing the MSCI EAFE Net Index which lost -0.45%, and the MSCI ACWI ex-US Net Index which returned -2.99%. Meanwhile, Ariel Global Fund Investor Class returned -3.92% in the third quarter and Ariel Global Fund–Institutional Class delivered a -3.82% return, compared to the MSCI ACWI Index which lost -1.05% for the same quarter. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Ariel International & Ariel Global Fund, in its Q3 2021 investor letter, mentioned Baidu, Inc. (NASDAQ: BIDU) and discussed its stance on the firm. Baidu, Inc. is a Beijing, China-based internet company with a $49.4 billion market capitalization. BIDU delivered a -34.29% return since the beginning of the year, while its 12-month returns are down by -26.26%. The stock closed at $142.09 per share on December 17, 2021.

Here is what Ariel International & Ariel Global Fund has to say about Baidu, Inc. in its Q3 2021 investor letter:

"When we have such a high level of conviction for a company it is not uncommon for us to own it in size across our portfolios. Such is the case with technology giant Baidu, whose leading search engine has been dubbed the “Google of China.” This quarter shares sold off in sympathy with the Chinese internet sector as investors were rattled by the government’s sweeping regulatory crackdown intended to promote “common prosperity” by easing wealth inequality. While we recognize the greater political risk of investing in emerging markets such as China and incorporate an appropriately higher risk premium in the discount rate in our valuation models, we believe Baidu’s business strategy is aligned with national policies and prioritie and is therefore not adversely impacted unlike some other players in the internet sector who are in the eye of the storm.

Indeed, the Chinese government recognizes Baidu’s large, upfront investments in many next-generation artificial intelligence (AI) technologies and hails it as a national champion. For example, the company’s Advanced Driving Support System (ADAS), Apollo, has twice as much data on miles driven than any other initiative in the world, giving Baidu (and China) a large lead in the global AI arms race. In addition, Baidu’s cloud offering touts highly differentiated Platform as a Service (PaaS) features and capabilities for a demanding enterprise customer base. While these initiatives are a temporary drag on margins and require long-term execution, their success will bolster China’s “dual circulation” strategy aimed at spurring domestic demand, innovation and self-reliance." (Click here to see the full text)

Baidu Inc (ADR) (NASDAQ:BIDU), Icon, app, Symbol, Sign, logo, smarphone
Baidu Inc (ADR) (NASDAQ:BIDU), Icon, app, Symbol, Sign, logo, smarphone

Twin Design / Shutterstock.com

Based on our calculations, Baidu, Inc. (NASDAQ: BIDU) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. BIDU was in 44 hedge fund portfolios at the end of the third quarter of 2021, compared to 59 funds in the previous quarter. Baidu, Inc. (NASDAQ: BIDU) delivered a -12.40% return in the past 3 months.

Just this month, we also shared another hedge fund's views on BIDU in another article. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q3 page.

Disclosure: None. This article is originally published at Insider Monkey.