Friday, January 8, 2010

Bookkeeping: Selling Baidu (BIDU)

I am going to close out the last of my Baidu (BIDU) at $406 for a cool 135% gain.  That sounds really impressive until you realize I sold the majority of my position about 7-8 months ago and have been waiting for (wait for it)  ....

... the pullback.

[long term chart]

To be fair (to myself) the stock has done very little since mid September, so the lost opportunity was in mid to late summer, not fall or winter.  With such a long sideways movement (now approaching 4 full months), Baidu will eventually have a big move coming - up or down will be the question. 

I know valuation does not matter when central bankers go mad, but as much as I love the sector and Baidu's dominance.... buying stocks at 70x forward earnings under the greater fool theory (surely someone will buy it from me at 90x earnings!) is not my strong suit.  Hence I haven't found a good place to add exposure and holding 1 share for months on end is relatively useless. 

The stock has not participated in the melt up of late which is curious, and it sits below its 50 day moving average.  If it breaks below $395 *the selloff* might finally occur, but with a stock market that refuses to go down on any news, it would take quite an effort for that to happen.

[short term chart]

That is not really the reason I am selling; I suppose it could go to to 90x earnings or 110x earnings - why not?  Just takes more easy money at the printing press, and we can have 200x valuation if we wish.  I can find similar growth stories for 1/3rd the valuation so I'll focus on those - every momo hedge and mutual fund is probably in Baidu (and Apple, and Amazon, and Google) so we'll lurk in some more less popular waters.

No position

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