Stanley Druckenmiller (Trades, Portfolio) is the President, CEO and Chairman of Duquesne Capital, which he founded in 1981. The fund is reported to have more than $10 billion in assets. He managed money for George Soros (Trades, Portfolio) from 1988 to 2000 as the lead portfolio manager for Quantum Fund. With an estimated net worth of around $3.5 billion, he is ranked by Forbes as one of the richest people in America. Last quarter, he initiated a position in Baidu (BIDU, Financial) by buying 86,200 shares.
Baidu is a Chinese-language internet search provider. The company offers a Chinese-language search platform on its website, Baidu.com, to enable users to find relevant information online, including Web pages, news, images, documents and multimedia files, through links provided on its Websites.
In addition to secular tailwind from the fast-growing internet user base, the company is also benefiting from its transformation from a PC-centric company to a mobile-first company. The company is now a market leader in mobile search, mobile maps and app distribution in China. In addition, Baidu has a broad portfolio of apps in video, travel and other verticals. The company's focus on mobile helped it re-accelerate its top line, and its full-year revenue grew 54% year over year in 2014 and 34% in 1QFY2015.
The company's mobile search traffic now exceeds PC search, and it continues to increase as a portion of overall search traffic. The company continues to invest in making its search faster, more relevant, more visual, more personalized and more real time. In November, Baidu launched personalized results, returning tailored, more relevant search results. The company made instant search faster and more relevant than before, further improving the Baidu user experience and helping increase page views and click-through rates. Overall, Baidu's key monetization metrics, like the number of paid clicks, click-through rates, cost per click continues to trend in right direction.
Going forward, the company is beginning the next phase of growth in 2015 where it plans to enable users to discover, connect and transact, all through Baidu. Whether it is buying movie tickets or tickets to local attractions, hailing taxis and private cars, booking hotels, purchasing group-buying offers or ordering for delivery – all can be done through Baidu platform.
In the past year, the number or transactions completed on the Baidu platform has grown over fourfold. In each of its categories, Baidu created value for users by delivering a better experience through closed-loop transactions. In 2014, Baidu also solidified the gateway dominance of mobile Baidu and mobile maps, adding new product features, such as Discover and Nearby, to offer better local services to its users. The company also rolled out new key offerings, such as Baidu Connect, Baidu Wallet and Baidu Foot Delivery in 2014. The company plans to focus on driving adoption of its closed-loop offerings in 2015.
Baidu is a fast-growing company. According to sell side estimates, its sales are expected to rise 39% in the current year which is almost comparable to that of Facebook's (FB) 37%. However Facebook is trading at a significantly higher Price to Sales multiple as compared to Baidu. While Facebook's P/S multiple is 17.82, Baidu is trading at a P/S multiple of 9.12. This low relative valuation, as compared to other fast-growing internet peers, makes Baidu a favorite among sell-side analysts. Out of 28 analyst covering the company, 26 are positive and have buy rating and two have hold ratings. I believe the company is a good buy given its strong growth prospects and market share gains.
