Selling Google, buying Baidu

chart_ws_stock_baiduinc.top.pngBy Paul R. La Monica, editor at large


NEW YORK (CNNMoney.com) -- Google is to be commended for taking a stand against censorship in China.

But investors are taking a stand of their own. They're selling Google and buying Baidu, also known as China's Google.

paul_lamonica_morning_buzz2.jpg

Shares of Baidu (BIDU), which already was the leader in online search in China before Google (GOOG, Fortune 500) began redirecting users of google.cn to its Hong Kong site last week, are up 4% in the past week and nearly 50% this year.

Google, by way of comparison, has missed out on this year's tech rally. It has fallen nearly 10% so far in 2010.

But is the run-up in Baidu overdone? And what about the sell-off in Google? Well, some think that both stocks are still a buy.

To start, the biggest mistake investors might be making is to think that Google has thrown in the towel on the world's most populous nation.

Morris Mark, president of Mark Asset Management, a New York-based hedge fund that owns shares of Google and Baidu, said that investors need to realize that Google still will be able to partake in the growth of online search in China.

"There is no question that people were looking at China as a major opportunity for Google and were disappointed," Mark said. "But this is important. Google has not left China. They've based the search servers in Hong Kong and China has not blocked the site."

For that reason, he thinks the recent dip in Google was an overreaction. He points to the fact that Google is still a market leader in the United States and most other areas around the globe. And despite that, the stock trades at only about 20 times earnings estimates for 2010.

As for Baidu, Mark conceded that the stock, valued at more than 60 times 2010 earnings estimates, is trading at a sizeable premium to Google. But he argues that Baidu is worth it considering its growth prospects. Analysts expect Baidu's profits to grow about 50% in 2010 and 2011.

Steven Weinstein, an analyst with Pacific Crest Securities who follows Google and Baidu, agreed that investors shouldn't be playing an either/or game with the two stocks.

He pointed out that analysts' current growth estimates for Baidu don't factor in any benefit it may get from Google scaling back in China. So he thinks the recent move up for Baidu's stock is not an overreaction.

But at the same time, the fact that Baidu is beating Google in the Chinese search game doesn't mean that it's time to sell Google.

"Yes, China is a large and rapidly growing market. But there are 5 billion other people in the world in markets where Google dominates," Weinstein said. "There are other growth opportunities that Google has which people are discounting."

- The opinions expressed in this commentary are solely those of Paul R. La Monica.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.98%3.95%
15 yr fixed3.05%3.05%
5/1 ARM3.32%3.71%
30 yr refi4.05%4.03%
15 yr refi3.12%3.11%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 16,805.41 127.51 0.76%
Nasdaq 4,483.72 30.92 0.69%
S&P 500 1,964.58 13.76 0.71%
Treasuries 2.27 -0.00 -0.09%
Data as of 5:36am ET
Company Price Change % Change
Ford Motor Co 13.78 -0.62 -4.31%
Microsoft Corp 46.13 1.11 2.47%
Apple Inc 105.22 0.39 0.37%
Bank of America Corp... 16.72 0.12 0.72%
Yahoo! Inc 43.50 0.90 2.11%
Data as of Oct 24

Sections

New York headlines took a straight forward and direct approach with NYC's Ebola news. More

The midterm elections are around the corner, and the economy remains a top concern. With unemployment down and inflation low, why do people still feel the economy stinks? More

Shares of Facebook recently topped $80. They've more than quadrupled from their post-IPO lows of two years ago. Can Mark Zuckerberg keep the momentum in mobile going? More

Using technology developed for the military and implemented in Iraq, schools have installed alarm systems that detect gunfire. More

If you're looking to fly this holiday season, the clock's ticking to get the best prices. More



Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.