Don't Bet Against Baidu.com

The Chinese Internet juggernaut may be one of the market's safest havens.
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Baidu.com's

(BIDU) - Get Report

run is far from over.

Shares of the Chinese Internet juggernaut soared nearly 8% on Monday to close the day at $252.89 -- more than double the level where they started the year.

But investors would be wise to hold on for more. The company seems on track to deliver a strong third quarter, which could send shares higher. Management continues to make shrewd moves, and if things continue to sour in the U.S. markets, investors could flock to Baidu as the perfect haven.

Another possible boon for near-term investors: The National Day of the People's Republic of China, which takes place on Oct. 1. The day marks a weeklong holiday in China, and many citizens use the occasion to travel.

Also, the strength of segments like travel- and education-related online advertising "are likely to contribute well to top line upside vs. guidance," RBC Capital Markets associate analyst Stephen Ju wrote Monday in a research note raising the company's price target to $333.

Even beyond the next quarter, RBC is expecting big things from Baidu: It expects Baidu to earn $7.81 per share in 2009 -- about 3.2 times the $2.41 it expects for 2007. RBC makes a market in Baidu shares.

While that kind of growth may seem daunting, Baidu is increasingly well-positioned in the rapidly expanding Chinese Internet market, where e-commerce is just starting to take hold.

And because e-commerce companies are among the biggest buyers of search ads, Baidu likely would be the search engine that benefits most from growth in the sector. Indeed, "e-commerce is starting to emerge as a thematic catalyst as larger e-commerce players are signaling strong spending intentions," Ju noted.

But even with the growth that seems to be in store from search ads, Baidu's management continues to look for new ways to make money.

On Monday, the company launched Baidu TV, a video service that will allow advertisers to post video ads across a network of 160,000 Web sites that already display text ads. Advertisers will be able to reach 140 million Chinese Internet users through the service, and will likely be willing to pay up for the chance to reach consumers through a rich medium like video.

Still, the biggest boost for Baidu investors may come from the growing troubles in the U.S. economy. As fears grow about the reach of the subprime crisis and its broader impact, traders are likely to flock to the few investment opportunities that can avoid the ugliness entirely.

And perhaps no company fits this billing better than Baidu. Its growth story will be especially appealing to investors in the event of the U.S. downturn. Pegged to Internet advertising, the Chinese economy and the growth of e-commerce in China, Baidu stands perfectly positioned to benefit from three major bull markets -- even as markets elsewhere look sour.

Under that scenario, investors would be forced to pay a heftier premium for a stock that's already putting up a great performance.