2012: The Year Baidu Investors Got Bit


In these waning days of 2012, there's a chill in the air and snow in the forecast. What better time of year to curl up by the fire and ponder: What went wrong with the stocks you picked back in January? What went right? And should you keep these stocks in your portfolio, or go out and find something new?

That's what we aim to do today, as we flip back the calendar, and consider the year that was at Baidu .

A few Foolish facts about Baidu

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1-Year Revenue Growth (YTD)


1-Year Profit Growth (YTD)


CAPS Rating (out of 5)


Source: Motley Fool CAPS.

What happened at Baidu this year?
After a topsy-turvy 2011, the company commonly known as "China's Google" (but more accurately known as the company that displaced Google from China) came roaring into 2012. From the beginning of January to early April, Baidu shares ran up an impressive 30% -- a pace that, if continued, would have had the stock doubling by year end. But it was not to be.

The company's first quarter earnings report, which came out April 24, showed Baidu's revenue rising 75%, and earnings up 76%. Somehow, however, analysts had got it into their heads that Baidu was going to do even better than that. When Baidu failed to measure up, a lot of investors got to thinking that it might be time to take profits rather than letting their money ride.

Result: Baidu shares proceeded to lose 30% over the next three months.

When Q2's earnings rolled around in July, the company that grew earnings around 70% in Q1 just kept on growing, leading to an immediate pop. But as we've come to expect, it was short-lived. In August, worrywarts found their latest excuse to question the Baidu's success: browser and anti-virus software maker Qihoo 360 , which announced plans to compete with Baidu on search.

Ever since then, Baidu's share price has been on the wane, recently testing a 52-week low. Investors continue to worry that Baidu will somehow fumble "the transition to mobile" -- a transition that Facebook and Google seemed to manage just fine, but one that for some reason everyone seems to think Baidu will flub.

Well, maybe it might. Maybe Qihoo and its less than $300 million in annual revenue will beat Baidu and its $3.3 billion revenue stream... but I wouldn't bet on it. With 2012 drawing to a close, my money's still on Goliath to beat David in 2013.

Regardless of your short-term view on the Chinese economy, there may be opportunity in Baidu. Our brand-new premium report breaks down the dominant Chinese search provider's strengths and weaknesses. Just click here to access it now.

The article 2012: The Year Baidu Investors Got Bit originally appeared on Fool.com.

Fool contributorRich Smithdoes not own shares of, or short, any company named above. You can read about his other predictions, and find more of his recommendations on CAPS, where Rich is known as TMFDitty, currently ranked No. 309 out of more than 180,000 members. The Motley Fool owns shares of Baidu, Facebook, and Google and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Baidu, Facebook, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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