NEW YORK ( TheStreet) -- Surprise volatility is a common characteristic in Chinese stocks.
But there are still companies with stable fundamentals and positive outlooks that can be found trading at bargain prices. One example can be seen in Baidu (BIDU), the company typically referred to as the "Chinese Google."
Baidu commands an impressive 70% market share in China's online ads and search spending. The stock has been beaten up in recent months and shows year-to-date losses of nearly 10%. This creates a scenario where valuations are relatively cheap at a time when growth rates are poised to make large runs higher.
The broader scenario in China looks bleak at the moment.The country's credit bubble bears some alarming similarities to the U.S. credit crisis in 2008. This has pushed down Chinese stock values by nearly 15% so far this year, a stark contrast with the bull run in global markets during the same period. From a value perspective, however, this has left some quality companies wallowing in oversold territory. For investors with long- term time, some attractive opportunities can be found -- and one of the stronger cases can be made for Baidu. Its revenue are expected to rise by 35% in 2013, based largely on continued growth in the number of Chinese internet users. Lower-tier advertisers recognize these trends and continue to direct more advertising money toward online venues. Earnings per share for 2013 are expected to hold below $5, however, and this weaker increase (a mere 4%) is being attributed to rising costs and stalling sales. Looking at stock values, the latest run lower has shaken-out many of the most bullish investors, and damaged sentiment for the stock's prospects. The highs from 2011 topped-out at nearly $160, and Baidu now trades below $90 (or 18 times earnings). Still, this compares favorably to some of the sector's main players, as Google's (GOOG) valuation is now seen at 26.4 times earninGs . And when we look at projected earnings per share, Baidu's valuations start to look excessively cheap.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV