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Stock lessons: IPOs

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First let’s mark Oct 14 2009: Dow 10,000 2.0 (Yahoo Tech-ticker video below)

(did you notice the Yahoo ~~~ in the end, Yahoo became more goofy under Carol)

My topic today is IPO. I have not got much luck from IPO investing (to be more precise, speculating). My lessons are the following:

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Baidu: got a bit evil?

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On Nov 17, Baidu (Nasdaq: BIDU), China largest web search company got a huge blow in the market as the news of “Baidu placed “faked doctors and drug ad” broke (see BW for more details). This reminds me of the Focus Media (Naqdaq: FMCN) Spam text messaging story about 7 months ago. In both cases the news was broke in CCTV, Chinese national TV channel and a part of offical Chinese media. Some people may not know CCTV has large market share in the TV Ad market. Some people may sympathize with Baidu and call for “buy” the BIDU stock amid this temporary weakness.

Before this news about Baidu, actually there were reports that Baidu was guilty of “intensionally hiding the China San’lu milk powder scandal” during August this year (Olympics time). Luckily to them, local goverment officials did the exact same thing to keep the big party on. But this time they got caught. Some financial analysts naively think those Ad. made up a small portion of the Ad. revenue. This maybe true. But I don’t the problem is that simple.

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Weekend thoughts w/e 051008

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Baidu, Google China
Keso wrote this Chinese article a while back Who is Google China’s opponent? He is talking about the difference between Baidu (Nasdaq:BIDU) and Google, and he thinks Baidu has created a brand and a series of products, and consequently built a moat to fend off Google and other competitors.

This is confirmed by gseeker baidu from readers series: “baidu” real estate, “baidu” fashion apparel, “baidu” KTV. Don’t know how Robin Li (Baidu CEO) feels about people using his company’s name? By the way, gseeker is the best blog about Google in China, in my mind.

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NetSuite IPO update

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It priced at $26, according to AP news.

I did NOT bid on NetSuite IPO eventually. Two things: it raised price range from initial 13-16 to 16-19; and I noticed NetSuite is not profitable so far. On the other hand, when its bigger rival, the on-demand software provider SalesForce (CRM) did IPO in 2004, it was about to turn profitable.

Don’t know the exact reason why the recent weak Mr. market valued it so high. I remember more than 3 years ago CRM was priced in mid teens range during IPO. I suspect the recent strong show of VMWare is one reason. Like the Baidu situation in 2005, it did IPO one year after the successful IPO of Google, people (who missed GOOG) bid up BIDU from the IPO price of $27, to openning price of $70. The night before IPO I was planning to buy it at $35, and get out at $42. My plan did not get executed because I was way too conservative 🙂

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What to read from PE ratio?

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PE ratio, stands for the stock price vs. earning per share ratio, is the most commonly used (and mis-used) ratio in the investing world. I saw this PE ratio question at trader168 couple days ago, the question goes like this:

BX P/E: 1.97
MSFT P/E: 21.15
JAVA P/E: 46.01
BIDU P/E: 195.95
VMW P/E: 268.98

Why the big difference on PEs from difference companies? Is that true that we should not compare PEs from different industries? (my take: that’s true)

Is PE a still usable indicator? (my take: yes. If used properly)

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Focus Media FMCN is hotter than BIDU

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It seems not very intuitive that Focus Media (FMCN), a LCD media advertising company, has done better than Baidu (BIDU), the No. 1 search engine in China. After all , putting up the LCD screen, soliciting the advertising customers, and creating those short films are not high tech as “search engine”, which involves creating a large number of clustered computer, and complicated search algorithm. But this is the reality, Focus Media (FMCN), closed above $80 today amid the new offering of $500 m, the PE (ttm) is about 76, market capital 4.4 B. Since its debut in July 2005 (at 20s), it’s up about 300%.


How about Baidu (BIDU), it debuted on August 2005 at about $120, and it closed at $124.50 today. Here is the chart. The PE is about 165 and market capital 4.2 B.

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