Ouch! I am going to declare victory on Baidu.com (NASDAQ:BIDU) here. One of my 13 Outlier 2008 Predictions was a 40% loss in the name, which at the time was $400. That time was not long ago - Dec 31, 2007! 6 weeks ago...sheesh. I was actually pretty good all around on this prediction involving Google, Yahoo, and Baidu.com
#8 Google is finally hit by an earnings miss by Q3 2008. It won't be a major miss, but enough to rock psychology. Advertising slowdown, led by US recession... err not a recession but a "slowdown" (its a political year folks), finally hits Google, despite secular growth. Google will be seen as human and a company that is not immune to the business cycle, driving the stock down. Baidu.com will suffer a 40% loss as investors, not realizing Baidu is in China and Google is in the US, think US advertisers will cut their spending with Baidu.com as well. Or maybe it's just too expensive. In a sick twist of fate Yahoo emerges as the best performer in the space as News Corp comes in with a buyout as the stock trades listlessly again in 2008.
So 40% off of $400 is $240. Today's stock price? $239.
I'm actually beginning to get interested in Baidu.com here as it is still the dominant ad/search name in the fastest growing market on Earth, but with the technical pattern in such disarray it is simply better to wait for the chart to improve and miss trying to catch the bottom. This causes a lot of bloody fingers as we try to catch a knife. So instead of trying to guess what floor the elevator stops on the way down; I'll wait for a time when the elevator is moving back up... I'll miss catching the bottom (floor 1), but once people go back to these type of stocks the moves will be tremendous so catching it at floor 3 will be fine. I still retain a minor position for the fund, in which I still have a profit since I sold along the way ... way up there in the $350s-$420s. Talk about a round trip - I began buying in August in the $160s-$180s and we look like we are heading right back.
This is why I don't mind a high turnover rate for the fund - people who like low turnover to avoid taxes are right now giving back all their gains over the past few years... day by day. Paying taxes is a sign of success in my book (although double taxation is an awful thing Mr Government) so I'd rather have taxes TO pay.... than to watch my taxable gains all disappear. Maybe we can adjust that thinking in bull markets when the market generally only trends up - but that is not our era the past 6 months.
So Baidu.com joins Google, and Apple as former teflon stocks now below 200 day moving average. Only Research in Motion remains above that key level, and she tested that price point this morning. But as a group, tech is simply moribound and no reason to focus on it until that changes. That said, this group is extremely oversold and if retail, homebuilder, and financial stocks can rebound so strongly off a washed out bottom I can see the same thing developing here once people move back to technology and don't consider it evil. That could be in 2 hours, 2 days, 2 weeks or 2 months. But it will turn back in these guys favor eventually. The world is not ending for these quality names.
Disclosure: Long Google, Apple, Research in Motion, and Baidu.com in fund; no personal positions