Baidu (BIDU, Financial) reported weak operating results in the last two quarters and, after much analysis and discussion, we decided to reduce our position in the stock. The company is currently facing some headwinds due to near-term macroeconomic concerns in China, regulatory/clean-up issues affecting certain segments of advertising revenue, increased management turnover, and more intense market competition. Growth in internet advertising in China has slowed more than expected, and the company is facing increasing competition in advertising, particularly from ByteDance (owner of popular short video app Douyin), which is disrupting the digital advertising industry profit pool. This is impacting Baidu’s expected growth and profitability, and has caused us to reduce our estimate of its underlying intrinsic value. That said, the company continues to maintain a dominant position as a search-engine provider, which we believe should remain quite valuable.
From Tweedy Browne (Trades, Portfolio)'s third-quarter 2019 commentary.
