Baidu: Buy High, Sell Higher

Oct. 3.07 | About: Baidu, Inc. (BIDU)

If you're not familiar with Baidu (NASDAQ:BIDU), it's basically the Google of China. It has experienced amazing returns over the last 12 months- even better than the Chinese market as a whole. I purchased shares last week during a small price dip, and it has since returned to its sharp upward trend.

It was up about 12.5% on Tuesday due in large part to JP Morgan initiating coverage with an "Overweight" rating.

BIDU adds back some of the Asian exposure to my portfolio that was lost when I sold JASO a couple weeks ago. BIDU has a history of beating analyst earnings estimates (one of my favorite metrics). It also has good earnings momentum (another one of my favorites). Valuation metrics are absurdly high, but then so too were Google's and it has still performed incredibly.

Further, Baidu has very strong (and improving) margins, plenty of cash, and zero debt. This trade brings my tech holdings to around 19%, which makes it my largest sector exposure, followed closely by financials.

This is a stock that I will be watching closely. The appreciation potential is huge, but so too is the depreciation potential as China has appreciated so much so fast that it's now in bubble territory, and could burst at anytime.