Everybody knows that the first thing that goes down in an economic recession is advertising. BIDU lives from advertising and it is trading at 95 times 2006 EPS and 21 times 2006 revenue.
I say these extremely high multiples will contract to at least half during the course of 2007.
Therefore I'll open a short position in BIDU shares around today's open.
Trading plan:
Sell BIDU shares short, 6.66% of capital as always.
Speaking of advertising companies. I'm taking a look at LAMR which is a billboard advertising company. Trading at 159x earning compared to the industry avg at 84. Earnings growth is pretty damn weak as well, seems weird but says that LAMR income growth is 2.5 to industries 129?. Im shorting this one soon enough, think its at least worth a short to $60. What your opinion dave? Just breaking myself into all this P/E fundamental lingo ;)
-fous
Hi fous, after a brief look I would say LAMR is an awesome short, but I wouldn't look to close it at $60, but at $30 !
Declines are much steeper and faster than advances. I believe one needs strong hands in the shorting game too, can't bet on small fluctuations, just on the main trend, or will miss most of the move.
Good luck ;)
Thanks for you opinion Dave :) BIDU looks good to i might have to join you on that one as well. I'd like to see how price handles this ascending channel first though. Im always looking for those technical signs for entry ;)
QuoteEverybody knows that the first thing that goes down in an economic recession is advertising
Yes, during recessions advertising is one of the first expenditures that businesses cut. I've been working in the advertising industry since 2000. I was there during the recession of 2001. In mid-late 2000, almost all of our clients were slashing their budgets. Every week I was seeing notifications of another client's intentions to cut/eliminate its budget. If and when the next recession happens, I think I'll know it's coming 6-9 months ahead of time. Right now clients are spending more, not less, and Q406 was incredibly strong for us and other companies in our sector, which tells me there probably won't be a recession this year. I believe the markets are merely encountering a correction, just like last May-July.
I agree that BIDU is too expensive. I'm surprised it didn't get a bigger haircut on Tuesday. Some stocks are overpriced and a correction will fix that.
Thanks for your input Lucas Scott, just great.
Please ask your older workmates how Q4 1999 was in advertising terms? Because the peek of the market was January 14th, 2000, I believe before any negative sign in the advertising market, quite the opposite. Markets are always the first to change.
Thanks.
I am really not a big fan of shorting stocks but I guess I have to learn the tricks of the trade.
Trading mainly at the long side of the market it could be useful to better understand the way the short community is thinking!
I can see a double top in the intraday chart so I am short BIDU. With a very nice entry point (or is that exit point ???)
Quote from: Michael on March 01, 2007, 01:10:46 PM
I am really not a big fan of shorting stocks but I guess I have to learn the tricks of the trade.
Trading mainly at the long side of the market it could be useful to better understand the way the short community is thinking!
I can see a double top in the intraday chart so I am short BIDU. With a very nice entry point (or is that exit point ???)
I see what your saying about the double top. It broke the double top after that but closed at what looks like a triple top. Am I wrong or is that a good technical sign to short?
Quote from: prodigykid6 on March 01, 2007, 06:33:11 PM
Quote from: Michael on March 01, 2007, 01:10:46 PM
I am really not a big fan of shorting stocks but I guess I have to learn the tricks of the trade.
Trading mainly at the long side of the market it could be useful to better understand the way the short community is thinking!
I can see a double top in the intraday chart so I am short BIDU. With a very nice entry point (or is that exit point ???)
I see what your saying about the double top. It broke the double top after that but closed at what looks like a triple top. Am I wrong or is that a good technical sign to short?
I think that if one considers an intraday chart to sell a stock short, to be coherent, it will also need to consider the intraday chart to all hold/buy to cover decisions from then on. The end result are very short term trades that won't bring any money over the long term. Anyway, this is just my opinion, I can be wrong.
BIDU was already down in 2007 before the bull market ended. This is a good indication that this short position is sound also from a specific company standpoint.
I'm expecting BIDU to break the $100.8 support on the downside through the course of next week, due to general market weakness. Then the stock will be definitely bearish, despite the presence of the 200 days moving average.
I'll continue holding BIDU short.
Here's what I wrote on Friday:
QuoteI'm expecting BIDU to break the $100.8 support on the downside through the course of next week, due to general market weakness. Then the stock will be definitely bearish, despite the presence of the 200 days moving average.
The market is responding accordingly. BIDU will probably break the $100.8 support next week, and if it could close the week below the 200 days SMA, at $95.35, it would be super from a bear's point of view.
Here's BIDU's website: http://www.baidu.com/
We can't understand anything, but it resembles Google.
Analysts are expecting $1.79 EPS for 2007 on $195 M revenue (http://finance.yahoo.com/q/ae?s=BIDU). This puts the forward earnings multiple at 57. The problem is if the company misses estimates, even by just a few cents, it will tank, because expectations are very high.
I believe BIDU will miss estimates by a lot due to my expectation of a severe slowdown or even a recession in the Chinese economy this year.
I'll continue holding BIDU short.
QuoteBIDU will probably break the $100.8 support next week, and if it could close the week below the 200 days SMA, at $95.35, it would be super from a bear's point of view.
The first support is down, as BIDU closed below the $100.8 level, at $99.67. Probably today it will retest the $100.8 support (now resistance) at the open and then fall back down.
We'll see if it can take out the 200 days moving average over the short term, which is now standing at $95.44.
I'll continue holding BIDU short.
BIDU had a 4.4% rally yesterday, but the trend, your best friend in the market (bull and bear), is bearish. The stock is down 7.4% in 2007 and my expectation is for it to go down by at least 50% as the current bear market unfolds.
That would mean something like $67 a share. My plan is to buy to cover around that place, and I'll continue holding BIDU short for as long as the market doesn't prove me wrong.
BIDU is a $2.19 B company with just $107 M in revenues in 2006. Its price to earnings ratio is 92. It should be cut in half even if we're in a bull market.
I'll use that second descending trendline as a guideline and will hold this short position for as long as the stock is set to close below that trendline, today standing at $112.58.
As I've been reading more about China and its economy, I'm not so sure there will be an economic recession or even slowdown there soon. They have too much savings. If there's a recession, the money banks, consumers and the government have would support the situation.
So my bear hand is getting weaker and weaker on Chinese short plays. But still I could see BIDU going down to the 200 days moving average, if the general market has a second leg down (also to the 200 days SMA). That second leg down should start today.
For me to keep BIDU's short the stock should keep closing below TL2 on the chart below. If the stock is set to close above that short term resistance trendline, I'll close my short with a small loss.
For today TL2 is standing at $104.96, so the stock needs to go down immediately for me to keep holding it short. The trading plan is:
HOLD BIDU short if it is set to close below $104.96. If it is set to close above that level, buy to cover.
QuoteFor today TL2 is standing at $104.96, so the stock needs to go down immediately for me to keep holding it short.
BIDU touched TL2 and didn't like the feeling of it, as the stock headed down immediately. Good for a short a like me. I'll keep the plan of holding BIDU short for as long as the stock is set to close below TL2 on the chart.
For tomorrow that trendline will be standing at $104.48.
Nothing new on BIDU, I'll continue holding it short for as long as it is set to close below trendline 2, which for today is standing at $103.28.
BIDU broke down to a new short term low and everything looks set for the continuation of the bear trend. Actually I'm not all that bearish on the Chinese economy (because Consumption is still just 35% of GDP), so the plan is to buy to cover BIDU at the 200 days moving average support, today standing at $96.08.
Specifically, BIDU's trading plan is:
1) Buy to cover with a nice profit at $96.08;
2) Buy to cover with a small profit if the stock is set to close above TL2 on the chart below, today standing at $102.43.
I covered per plan but wow, BIDU is in free fall below the 200sma!
BIDU is up over 20% in AH after reporting EPS $0.32... I cant believe it... PE over 100.. David, would you still recommend shorting it or do you have any idea why market seems to love BIDU so much?
Baidu.com quarterly profit, revenue more than double
SAN FRANCISCO (MarketWatch) -- Baidu.com Inc. (BIDU :
BIDU109.37, +4.69, +4.5% ) late Thursday reported first-quarter net earnings of 85.5 million yuan ($11.1 million), or 2.47 yuan per share (32 cents), up from 35.2 million yuan, or 1.02 yuan a share, in the year-ago period. Excluding share-based compensation expenses, earnings for the 2007 first quarter came in at 2.82 yuan per share (37 cents). Revenue rose to 275.6 million yuan ($35.7 million) from 135.6 million yuan last year. Analysts polled by Thomson Financial were expecting, on average, a per-share profit of 33 cents on revenue of $34.4 million. The Beijing-based Internet search provider forecast second-quarter revenue of 378 million yuan to 388 million yuan ($48.9 million to $50.2 million).