Baidu, Inc.شراء
8/23/24 - $bidu - bai du or not du bai?
8/23/24 :: VROCKSTAR :: BIDU
bai du or not du bai?
- of the (too many) chinese stonks you can buy today, this is one that should be on your watchlist if nothing else. (
BABA, 
PDD, 
VIPS, 
JD and BIDU for example).
- cash generative. even in a depressed local context, they still do 12.5% yield on EV (a far cry from the 50% thatVIPS does!) but part of that is size factor.
- PE (adjust for cash in the "P" so if enterprise value is 24 bn and mcap is 32 bn... multiply the 85/share by 24/32 or 75% to get $64) ... would be about 6+ x on the current year's $10 EPS and nearer to mid 5x's next year's $11.5+ EPS. a lot of chinese stocks are trading like depressed commodities.
- i don't LOVE the fact that they aren't really growing much. in fact, that's the key thing the market pays for today. but consider where china is in the cycle and how much trust we have that these things don't get USSA'd in the wrong moment. that's why there's such a heady discount. and it is a tough one to underwrite.
- personally in this (US) risk market, i've tended to prioritize fewer positions and trading spots. simplification is how i address uncertain environments. i tend to pick only a handful (at most) of things i know well, have an edge, and where i think there's great value. for now that's been
GDLC and 
NXT (and to a slightly lesser extent b/c the multiple remains rich 
CELH). i've been happy to play some EPS results. still batting well this 2Q (a few misses - but that's part of the game), but generally recycling this back into cash, the next smallish play, or consolidating it into these above positions I like. I did the same with VIPS the other day. I don't own it anymore.
- so in the grand scheme of things, if your personality isn't like mine and having 20 positions in your PnL isn't distracting, i'd defn put a little chinese exposure in there. just enough for it to matter if/when they start to move where you don't feel fomo to add immediately and can decide to add on subsequent pullback. but not too much where if we see a leg down in global risk (which is still how i'm personally positioned) you feel the urge to cut size as opposed to add. i'm only looking to add positions to my PnL today where i feel comfortable w/ the size that i can add and have ammo to do so.
- one way to do the above, i've found, is to figure out what is the size you feel "indifferent" owning it if it goes up or down 10% you're equally "happy". in that situation, sizing, you start to take emotion out of the equation a bit more. while i'm on the topic, and exhausting my words here I'll give you one example in theGDLC example.
- soGDLC still trades at at 35% discount to BTC. if BTC does undergo a correction to the 40k's you better believe this probably still trades 35 or even 40% discount. it may not, but in that scenario where it does (b/c it has in the past done this as BTC goes down), i've decided i'll want to be at a 75-80% position size (so i'll need cash and a simplified book to execute this quickly). in the event we end up in a few months (call it 6 months) toward the 90-100k level and the discount is closer to 10%, i'd want to be at about 25-30% position size. so today... we're in the middle w more uncertainty. and as such i'm not 75%, i'm not 25%... size is 45% (could justify 50%, but again i've decided on more cash into today/ next week specifically).
- so back to bidu. is it more of a buy? yes. is it something i'd personally feel comfortable making a 2-3% position? no. but could i ride with 50 bps in an all else equal risk on and supplement with 1% baba, 1% pdd and so on so i get to chinese stocks being 4-5% of my book? yeah defn. just the time for me is not right "now now".
- LMK what you think. that was a long one. hope it helps elaborate on my thought process a bit more.
- let's see what papa powell has for us plebs today.
V
BIDUbai du or not du bai?
- of the (too many) chinese stonks you can buy today, this is one that should be on your watchlist if nothing else. (
BABA, PDD, VIPS, JD and BIDU for example).- cash generative. even in a depressed local context, they still do 12.5% yield on EV (a far cry from the 50% that
VIPS does!) but part of that is size factor.- PE (adjust for cash in the "P" so if enterprise value is 24 bn and mcap is 32 bn... multiply the 85/share by 24/32 or 75% to get $64) ... would be about 6+ x on the current year's $10 EPS and nearer to mid 5x's next year's $11.5+ EPS. a lot of chinese stocks are trading like depressed commodities.
- i don't LOVE the fact that they aren't really growing much. in fact, that's the key thing the market pays for today. but consider where china is in the cycle and how much trust we have that these things don't get USSA'd in the wrong moment. that's why there's such a heady discount. and it is a tough one to underwrite.
- personally in this (US) risk market, i've tended to prioritize fewer positions and trading spots. simplification is how i address uncertain environments. i tend to pick only a handful (at most) of things i know well, have an edge, and where i think there's great value. for now that's been
GDLC and NXT (and to a slightly lesser extent b/c the multiple remains rich CELH). i've been happy to play some EPS results. still batting well this 2Q (a few misses - but that's part of the game), but generally recycling this back into cash, the next smallish play, or consolidating it into these above positions I like. I did the same with VIPS the other day. I don't own it anymore.- so in the grand scheme of things, if your personality isn't like mine and having 20 positions in your PnL isn't distracting, i'd defn put a little chinese exposure in there. just enough for it to matter if/when they start to move where you don't feel fomo to add immediately and can decide to add on subsequent pullback. but not too much where if we see a leg down in global risk (which is still how i'm personally positioned) you feel the urge to cut size as opposed to add. i'm only looking to add positions to my PnL today where i feel comfortable w/ the size that i can add and have ammo to do so.
- one way to do the above, i've found, is to figure out what is the size you feel "indifferent" owning it if it goes up or down 10% you're equally "happy". in that situation, sizing, you start to take emotion out of the equation a bit more. while i'm on the topic, and exhausting my words here I'll give you one example in the
GDLC example.- so
GDLC still trades at at 35% discount to BTC. if BTC does undergo a correction to the 40k's you better believe this probably still trades 35 or even 40% discount. it may not, but in that scenario where it does (b/c it has in the past done this as BTC goes down), i've decided i'll want to be at a 75-80% position size (so i'll need cash and a simplified book to execute this quickly). in the event we end up in a few months (call it 6 months) toward the 90-100k level and the discount is closer to 10%, i'd want to be at about 25-30% position size. so today... we're in the middle w more uncertainty. and as such i'm not 75%, i'm not 25%... size is 45% (could justify 50%, but again i've decided on more cash into today/ next week specifically).- so back to bidu. is it more of a buy? yes. is it something i'd personally feel comfortable making a 2-3% position? no. but could i ride with 50 bps in an all else equal risk on and supplement with 1% baba, 1% pdd and so on so i get to chinese stocks being 4-5% of my book? yeah defn. just the time for me is not right "now now".
- LMK what you think. that was a long one. hope it helps elaborate on my thought process a bit more.
- let's see what papa powell has for us plebs today.
V
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