Time to short Baidu?

Am I the only one seeing a bubble in BIDU shares? It's ok that Google may pull out of China, but maybe they won't... and even if they do, there are more competitors for Baidu in there.

For the time being, all this controversy has resulted in Google becoming the number 1 search engine in China for the last couple of weeks (they had 36% market share previously). Good strategy.

Over the last 15 months shares have jumped 328%, and trades for 93 times historical earnings and 60 times projected 2010 earnings.

With BIDU shares seemingly priced for perfection, anything that goes wrong could be highly profitable.

Any thoughts on this?

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Comments (42)

Mar 24, 2010 - 12:45pm

Anyone know offhand how much of a premium 2-3 Month OTM Puts are trading at? I'll take a look later.

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Mar 24, 2010 - 2:08pm

"Anyone know offhand how much of a premium 2-3 Month OTM Puts are trading at? I'll take a look later."

depends how otm, the 570 puts are like $30 offered, with spot @ 610

Mar 24, 2010 - 2:24pm

Also, it does look like all this Google moaning about censorship was just a way to get publicity in China. And according to the latest data, it is paying off:

http://gs.statcounter.com/#search_engine-CN-daily-20100222-20100323

Mar 24, 2010 - 2:16pm

Already shorted them

-------------------------------------------------------- "I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcom
Mar 24, 2010 - 2:30pm

Thanks Jimbo, my June 520 Put bid just got hit @ 15.55 (IV ~43.95%) if anyone is curious.

Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock

Mar 24, 2010 - 2:41pm

I already got some puts on BIDU the very same day that the overdone "long Baidu, short Google" trade actually hit the front page of WSO. It's gotta be a contrarian indicator.

Also looking to go cash short as soon as the shit hits the fan.

Mar 24, 2010 - 2:53pm
UKtop:
I already got some puts on BIDU the very same day that the overdone "long Baidu, short Google" trade actually hit the front page of WSO. It's gotta be a contrarian indicator.

Also looking to go cash short as soon as the shit hits the fan.

Haha yeah, its similar to how in FX Retail positioning is usually an indicator for you to do the opposite

Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock

  • 1
Mar 24, 2010 - 7:03pm
UKtop:
I already got some puts on BIDU the very same day that the overdone "long Baidu, short Google" trade actually hit the front page of WSO. It's gotta be a contrarian indicator.

Also looking to go cash short as soon as the shit hits the fan.


Hey, as author of the front-page post, I'd like to point out that I said there that the trade was already overdone as of then... I like other names in China Internet better anyway.
  • 1
Dec 29, 2010 - 1:55pm
UKtop:
I already got some puts on BIDU the very same day that the overdone "long Baidu, short Google" trade actually hit the front page of WSO. It's gotta be a contrarian indicator.

Actually, although GOOG is up 7% from 3/25 to now, for a while that was actually a great trade.

Mar 24, 2010 - 6:47pm

Yeah I'd short too. And after all the trouble Google has cased the Chinese authorities, I doubt that even if they wanted to return anytime soon the Politburo would welcome them...

No chance, Short Baidu for the win!

I just play to win...
Mar 24, 2010 - 8:14pm

Read an interesting article in the NYT about Google's decision to bail and it really talked a lot about Sergi and how his family was persecuted in the USSR and the parallels between what China was doing.

Restricting thinking and thought is nearly impossible. All China is doing is continuing to make itself look bad in the worlds eye. They should thank god we need them to keep buying our debt or else I could see some stiff trade sanctions.

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Best Response
Mar 24, 2010 - 10:09pm

I started a 20% short position today and will add to my position as the stock moves higher. My bet is that we're near the top and that it's going to move lower within the next 60 days.

Since Google announced in mid January that they're leaving China, this stock as increased by over 55%! That's over $6 billion in added market cap on speculation that Google's exit translates into a massive windfall for Baidu - and even though it's true that Google's exit increases the odds in Baidu's favor, investors are acting as if Baidu has already capitalized (i.e. profited real $$) from Google's exit or that it's a sure thing that they will do so in the future.

But I don't think it's a sure thing because a lot of people who use Google in China do so for the English results, so Bing or Yahoo are actually closer substitutes than Baidu, and then there's the Chinese competition, which is admittedly small but China's Internet boom is just beginning and that some of these small companies may overtake Baidu like Google overtook Yahoo in the US or even worse, Baidu could suffer the same fate as AltaVista, Lycos, Excite ... these engines were all #1 at some point but are now dead.

Dec 29, 2010 - 1:10pm

looks like that short wasn't such a good idea... BIDU is up 66% since March 24th.

greenoasis:
I started a 20% short position today and will add to my position as the stock moves higher. My bet is that we're near the top and that it's going to move lower within the next 60 days.

Since Google announced in mid January that they're leaving China, this stock as increased by over 55%! That's over $6 billion in added market cap on speculation that Google's exit translates into a massive windfall for Baidu - and even though it's true that Google's exit increases the odds in Baidu's favor, investors are acting as if Baidu has already capitalized (i.e. profited real $$) from Google's exit or that it's a sure thing that they will do so in the future.

But I don't think it's a sure thing because a lot of people who use Google in China do so for the English results, so Bing or Yahoo are actually closer substitutes than Baidu, and then there's the Chinese competition, which is admittedly small but China's Internet boom is just beginning and that some of these small companies may overtake Baidu like Google overtook Yahoo in the US or even worse, Baidu could suffer the same fate as AltaVista, Lycos, Excite ... these engines were all #1 at some point but are now dead.

  • 2
Mar 24, 2010 - 10:47pm

I wouldn't short anything China right now. As long as the Fed continues to give away money @ 0%, people are going to continue to plow it into China and other emerging markets...

The Macro View http://themacroview.wordpress.com
Mar 24, 2010 - 10:49pm

I would definitely buy BIDU!!!
I would also buy C
Short PALM (if there are share available) or buy the puts of it but I would be careful because there can be takeover rumors but I doubt that there will be any takeover deals
I would buy FAZ
I would speculate on S
I would buy regional banks like RF, GNW, etc

I LOVE BIDU!!!

Mar 25, 2010 - 2:46am
unlimitedcf:
I would definitely buy BIDU!!!
I would also buy C
Short PALM (if there are share available) or buy the puts of it but I would be careful because there can be takeover rumors but I doubt that there will be any takeover deals
I would buy FAZ
I would speculate on S
I would buy regional banks like RF, GNW, etc

I LOVE BIDU!!!

Hey, why would you buy FAZ?

Mar 25, 2010 - 4:03am

Already shorted BIDU earlier today. Then now I see this post =)

I went short on PALM a while ago... bought C also. Wouldn't buy FAZ though, not for a while. And I don't see any strong reason to buy regional banks right now.

My favorite stock right now is GORO.

Wall Street leaders now understand that they made a mistake, one born of their innocent and trusting nature. They trusted ordinary Americans to behave more responsibly than they themselves ever would, and these ordinary Americans betrayed their trust.
Mar 25, 2010 - 4:03am

Oh, and NEOP. That stock is killer.

Wall Street leaders now understand that they made a mistake, one born of their innocent and trusting nature. They trusted ordinary Americans to behave more responsibly than they themselves ever would, and these ordinary Americans betrayed their trust.
Mar 25, 2010 - 9:53am

"I would definitely buy BIDU!!!... I love BIDU!!!!" - I don't think this guy got the PE point. This sucker has all the growth in the world built in. Like the author said, one diversion from those high expecatations and its dead.

Mar 27, 2010 - 9:04pm

Holding the Leveraged ETFs overnight long is just plain retarded. THEY ARE REBALANCED DAILY.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.
May 1, 2010 - 8:00pm

Remember, the Chinese government will force it up and keep it up as a matter of pride. Just look at every third news story that comes out in Chinese publications - something along the lines of "Google has broken promises and lied to everybody, we don't need Google, this is GREAT for Baidu, etc..." Hence, I'd be very hesitant to short it.

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May 2, 2010 - 12:02am

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Dec 29, 2010 - 2:11pm

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