Saturday, August 7, 2010

BIDU == doodoo.

Reasons BIDU sucks:
  • As tweeted this morning, I made at least two rookie, retard mistakes while trading in the name on Friday;
  • "Reiterations" from analysts;
  • COMP weakness;
  • Foreign filer;
  • China stock;
  • Shady past (see also China stock);
  • Valuation;
  • Chart.
Personal Vendetta.  Going into Friday I had decided that BIDU looked soft based on valuation, chart, and every other factor mentioned above.  Before the unemployment number came out I had decided to lay out the opening hour since it was such a hyped report.  After the bottom-buster got officially released I knew for sure we'd be in a gap down, down trending day.  In retrospect, laying out that first hour was probably the smartest thing I did all day.  On the snap back, the determination was made that the terribleness of the report must not have been adequately front-run and that the window became open to dump stock/short, the latter of which I did, at 86.31.  In a matter of minutes the stock imploded 1% and hit a technical level at 85.41 thusly I pulled half off the table and committed to let the rest run to a level that I felt needed to fill (at least) down around 81.  The action felt right, and I felt like I was right on.  For the past 3 weeks or so dude has been like Neo seeing the market in 3D strings of numbers and stuff, so all was going beautifully, until it didn't.  The market caught a bid, not from buyers stepping in, but from algos (or possibly the PPT) hitting offers to squeeze shorts into unloading the morning's newfound inventory.  Now, rather than put on a trailing stop, or even flat out selling, to lock in 1%+ profits, I decided to leave a little room for backfilling and further pressure.  To no avail.  Where a hard sell should have taken place without excuse at the breakout of technical level 85.40ish, I let the fucker run all the way back to 86 before bailing, effectively cutting my win down to < 0.70%, nice, but not the same.  Later that day I would re-short the name, but in less size such that there exists a hard $10 stop.  Tomorrow morning, after another day of rumination will decide if that position represents my best shot at making swing money on this name.  If it doesn't the position will come off.   Below are the one and ten minute charts as of the close of business on Friday.  As always, click to enlarge.

All Analysts are Scumbags.  Buy side, Sell side, who gives a shit.  All market participants have an agenda, and in a world driven by money, all participants have their price.  People who sell subscriptions trade against their subscribers, ratings agencies, as we have seen, will lipstick any pig if the honey's right, and analysts are no different.  So when I see three companies come out on July 22nd reiterating their buy/outperform positions on a "beat and guidance raise" the first thing that comes to mind is "no shit," the second is, "how much are they trying to sell?"

Nasdaq Composite's looking rough.  No need for a chart here, the fucker's barely holding the 200 dma, chips are not responding to earnings, and there's serious cause for review of a potential head and shoulders pattern developing that hasn't gotten much attention yet.  Frankly, I'd like the COMP to consolidate for about 3 months because it's component stocks are going to have to step up to the plate in order for earnings to carry us through the next phase of the market, as originally posited here, but that doesn't mean that bullshit numbers from the likes of internet search companies with checkered pasts should buoy hope.

Foreign Filer.  Three pages of commentary on quarterly 6F's followed by unaudited statements, with one 20F annually?  Sure buddy.  I'm confident that the company has deep concern for hiding their dirty laundry under those stringent circumstances...

All China Stocks are Scummy.  At some point there will be a discovery by the greater investing public that all co-listed Chinese stocks are scams run against the yield pig Americans.  MPEL, NEP, UTA, ADY, LPH the distance from hither to yon is too great to overcome the greed inherent in human enterprise.  Think about a mirror reverse situation.  If it was 7USD/CNY, and America was undergoing a culture shift, would you not find any excuse possible to go public in China?  You could raise a paltry sum (to them) 10MM and be set for life with no further motivation to perform.  China's need for resources, expertise, and technology are the benefit to America, not their shit stocks.

A Questionable Past.  Cursory google web searches give rise to support for the above held opinion that the moral compass for this company is, er, broken to say the least.  They have over the years:  abetted free music downloads (very similar to Napster) on parallel networks, understated revenues and use from their music search and download business, generated false click-throughs to boost page views for ad subscribers, to name a few.  Those are not questionable tactics at the fringes, they're flat out fraud in core businesses.  There's no reason to think that a company that would participate in the above wouldn't also overstate revenues, market share, and traffic for financial gain.

Valuation.  Valuation always gets tricky, especially with aggressive growth companies because I feel they're more about psychological reinforcement than actual value.  Being "standard" for a stock to trade 15x it's annual income never made much sense, considering that most private company sales can get done for 2-3x annual revenues and it's easy to crash a corporation of any size.  Alternatively, stratospheric PEs lead to rubes like me trying to sell the stock instead of waiting for a fundamental shift.  As @traderflorida says, "when a stock looks too expensive to buy, then buy it."  However, the company has begun hyping its expansion plans and ramping up R&D expenses.  For now, those costs have proven relatively tame as they need to be considering their cash position of about 875MM, or $2.50 per share.

Chart.  The daily chart is consolidating in a range and the lack of interest in heading toward the gap means that higher must be in the cards.  However, the weekly put in another candle almost entirely outside of the Bollinger so it's something to keep an eye on.

Conclusion.  I think it's funny in a sneering ironic kind of way, that after the 10:1 stock split BIDU is trying to model itself like GOOG, right down to the share count.  Fact is, one is the gold standard for corporate ethics, also produces superior search algorithms, as well as innovative, secure, and efficient software, and the other is, well, a search engine head with social media arms ... like YHOO.  There will be no mention of their new mobile operating system, which is easy to announce, tough to do well, and has yet to be seen.

Post Script.  All of the above go to an idea that this company found one of those golden veins in the market that make it impervious to reason, but it's too much effort for such an otherwise forgettable position.  Therefore, the actual conclusion is that pride has controlled about two hours of my time over the last two days writing this half-assed short thesis, as if the world would tomorrow realize "Oh yeah, BIDU is a big piece of shit and I need to dump it unceremoniously.  How do I know this?  Because some no-name waxed philosophical about three year old ethical misgivings."  Not to mention the 30 hours of angst over what amounts to a bad series of trading decisions.  I'm beating my brains out ... over a profitable trade!  After all this, vitriol, I have to remind myself that "investing" isn't a style I want, and therefore, will close the ego driven short position Monday and keep an eye on the price action, the only thing that really matters to me.