Baidu.com, Inc. (ADR) (BIDU)

TRACKWallSt (< 20) Submitted: 10/27/07 5:20 PM

Recs: 0 | Rec This

I think Baidu is a bubble. but i dont know how long will it take to burst due to the volatility that comes with all chinese stocks. (WBuffett experienced that with PTRchina)
BEWARE:

Its gonna get "overloaded", OVERVALUED

Report this Post Reply

ender2492 (46.78) Submitted: 11/03/07 11:36 PM

Recs: 0 | Rec This

What are the formulas that you used to calculate this? They seem to be working very well.

Report this Post Reply

Hibachi0 (99.86) Submitted: 1/17/08 5:07 PM

Recs: 0 | Rec This

Those numbers seem a little high. What formula of Graham did you use?

Report this Post Reply

HimuraBattousai (< 20) Submitted: 3/17/08 2:27 PM

Recs: 0 | Rec This

so if your price target at 1100 really comes true the P/E ration will be 1410. Your fair value at 440, the P/E is 564. I don't know where you get your Graham references but for sure he will not recommend this. He doesn't buy anything over 20 P/E. whatever your formula is its wrong. It may not go down yet, but it will one day (when you say a long time assuming this is not just a 5 year buy and hold).

Report this Post Reply

jagad5 (64.95) Submitted: 4/25/08 12:21 PM

Recs: 0 | Rec This

BIDU continues to meet or beat my forecasts. For next quarter (ends June '08) I expect at least:
REV - $94M
NET - $23M
EPS - $.69
Fair Value - $630 now
12 month target - $750

These are a seasonally adjusted prediction based on the last 12 quarters worth of reports. The curve fits almost perfectly, still have an R^2 > 0.99.

And there is still a lot of margin for error and the bumpy ride will continue. But the current price implies a growth rate of "only" 75%. Yesterday's report from BIDU suggests that they anticipate 35% growth from this quarter to next, which is MUCH BIGGER than 75% annual growth.

JMHO
Jag

Report this Post Reply

jagad5 (64.95) Submitted: 4/25/08 12:32 PM

Recs: 0 | Rec This

Graham looked at the stock market in about 1960. That was a time when he considered the market to be "fair valued." He found that the PE of stocks was approximately
4.4*(8.5% 2 * growth rate) / YAAA.

If BIDU is growing 50% per year and AAA rated bonds pay 5%, then it's PE should be
4.4 *(8.5 2 * 50) / 5 = 95.

As of yesterday's report (4/24/08), BIDU's revenues have grown 135% per year for 3 years. Net income grew nearly twice as fast. The last time I looked AAA bonds paid about 5.23% (the average from a bunch of the ones I could find in IBD). So right now, blindly using my formula predicts a future price for BIDU of $637 today, 754 in twelve months and $1137 in 24.

Do I really believe it will reach these targets on schedule? No but as long as the company grows as it has, the average price will continue to rise. The current price suggests 75% growth (solving the equation backwards to get g)

The 4.4 factor adjust for the change in AAA yields. They were 4.4% when Ben did his research. I first learned of this approach in the spring (maybe the April issue) of 1988. A couple of professors wrote an article in Harvard Business Review called something like "The Smart Crash of '87" in which they analyzed a sampling of stocks before and after Black Monday. The formula worked for predicting how low the stocks dropped. I've used this with my seasonal analysis forecasts for more than 10 years and have done extremely well.

All this is JMHO.

Jag

Report this Post Reply

jagad5 (64.95) Submitted: 4/25/08 12:33 PM

Recs: 0 | Rec This

My forecasts are based on seasonally adjusted predictions of future revenues based on historically reported revenues and income. I fit 12 and 16 quarters worth of data to three different models and pick the line that fits the past the best. Then I can forecast what I should expect if that trend continues. I then use Ben's formula to estimate what the price should be. I only buy stocks that are less than my estimated current value.

JMHO
Jag

Report this Post Reply

YoungInvestor99 (75.52) Submitted: 4/29/08 10:32 PM

Recs: 1 | Rec This

Trading @ 32 times book value, that is 3,200% market cap over book value. Does not sound like a Graham pick to me, sounds like a hot tech pick Graham would have ducked for cover to hide from. With that said, I rated this outperform too, because it is going to outperform the S&P.

Report this Post Reply

jagad5 (64.95) Submitted: 5/02/08 12:00 PM

Recs: 0 | Rec This

Thanks for the critique.

I agree that BIDU sells for way more than Ben's preferred 2/3 of Net Current Assets. He's the source of the formula, not my investing approach, which identifies growth at value prices. By that I mean stocks selling for PEs below what their growth justifies.

Book value doesn't mean much for a company like BIDU, or for most other intangible product companies, as almost their entire "book value" resides within the heads of their work force. The high Price/Sales ratio is more applicable in this case, I believe. I think it trades for about 43x revenues right now. But if the revenue grows 135% per year for two years, then it's PSR will be "only" 6.5. I protect myself with stop-loss orders and recommend others do the same to preserve profits.

A friend of mine pointed out BIDU to me. He is originally from Beijing but has lived in the US for more than 20 years. He uses the internet a lot and uses BIDU for any Chinese language search as it is superior to what he can find with Google.

JMHO
Jag

Report this Post Reply