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Google Or Baidu?

|Includes:Baidu, Inc. (BIDU), GOOG

One of the few purely Chinese stocks that I would recommend is Baidu (NASDAQ:BIDU). The company is the largest search engine in China. Baidu currently controls 80% of the Chinese search market. Google's relationship with the Chinese government over the past few years hasn't been that great. Google (NASDAQ:GOOG) was recently blocked in China when the party congress convened this year. Google will remain as a niche website in China due to company's hostile relationship with the Chinese government. Baidu could potentially grow rapidly in the near future because of the increase in Internet usage in China. Internet usage in China increased at a compound annual rate of 34% in the previous decade. Baidu will be able to capture most this incredible growth due to Google's weak presence in the country. Baidu has grown its revenue year over year at much faster rate than Google, as shown in the graphs below.

Fears about a hard landing in China also appear to be hyped. China has rebounded in recent months. The country is still growing at fast rate despite the fears."Long-term, whether the actual economy in China is growing 3, 4, 5, 6 or 7 percent, all of these are faster than the U.S., Europe, and Japan are growing," Adam Parker, chief market strategist at Morgan Stanley, said in a note. The company trades at a reasonable P/E ratio and has good fundamentals, which makes it a buy. Google clearly is the dominate search engine in America, but that just isn't the case in China. Baidu is in a good position for growth over the next few years due to the current situation in China.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: BIDU, GOOG