David Sharek
David Sharek is stock portfolio manager at Shareks Stock Portfolios and the founder of The School of Hard Stocks.
Sharek's Growth Stock Portfolio has delivered its investors an average return of 18% per year since inception vs. the S&P 500's 10% during that time (2003-2024).
David's delivered 7 years of +40% returns in his 22 year career, including 106% in 2020.
His book The School of Hard Stocks can be purchased on Amazon.com.
Baidu.com (BIDU) has gone from $41 to $109 and is still undervalued. How can this be? Profits are growing in the triple-digits is one reason. The second is we are now in the fourth quarter of 2010 and this is the quarter I look ahead to next year’s earnings. So when calculating a P/E I’m using 2011 estimates instead of 2010 (to get a leg-up).BIDU is selling for 74 times 2010 estimates. The stock usually has a P/E in the 60s or so. Currently, the stock is slightly overvalued. But looking ahead to what the stock looks like next year, the P/E is only 46 — which is very low for this stock historically. BIDU is undervalued.Earlier this year I read a profound statement that stuck with me:
“Sales of text-based search ads in China are expected to jump from about $1billion now to $4billion by 2012” source: Investors.com
Pros and cons of the on-year chart: Its either black or white – no grey. Pros are the LTG of 71%, P/E of “only 46”, triple digit growth the past three quarters and Estimated for the next two quarters. Con is the straight rise from $40. If BIDU gives back half that gain, it would fall to around $80. If that happened, the stock would have a P/E of 34 and be an even bigger bargain. I doubt smart money will let it fall that much.
Profits jumped 125% last quarter and sales rose 80%. The table below shows business is accelerating for BIDU.
Last quarter I thought BIDU was worth 70 times earnings (the estimated LTG is 71%). Let’s tone that down a bit and use a P/E of 65 to get a fair value on the stock, since we technically aren’t even in 2011 yet. BIDU’s 2012 fair value is twice the current stock price.
I first purchased BIDU at $9 on 5/11/06. BIDU fell from $40 to $10 in the bear market of 2008, and I sold when BIDU jumped to $18 in early 2009 (it just rose 80%). By the time I got back in it was $43 (10/8/2009).
