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Apple Inc. (AAPL), Baidu.com, Inc. (ADR) (BIDU): A Couple Stocks to Buy Before They Rebound

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With every uptick of the S&P 500, it’s getting more difficult to find undervalued stocks to buy. Nevertheless, a few great businesses have been left behind amid the market’s surge, particularly Apple Inc. (NASDAQ:AAPL) and Baidu.com, Inc. (ADR) (NASDAQ:BIDU). Though both companies are definitely facing turbulence, a contrarian look reveals two excellent market leaders up for grabs at bargain prices.

Apple
“It seems like the company has been making headlines for all the wrong reasons lately,” wrote Fool contributor Travis Hoium. With more than 200 days since the company’s last major product launch, he suggested that Apple needs to wow investors with a new product in order to change Wall Street’s narrative.

Apple Inc. (AAPL)Obviously, this is easier said than done, but don’t count Apple Inc. (NASDAQ:AAPL) out in 2013 yet. The company’s product launches happen on a much faster timetable than its peers. For instance, Microsoft Corporation (NASDAQ:MSFT)‘s Xbox One, announced last week, won’t be available to consumers until “later this year.” Even Samsung runs on a slower launch schedule than Apple Inc. (NASDAQ:AAPL). After a March 14 announcement, its Galaxy S4 won’t reach U.S. carriers until April 26. Comparatively, the iPhone 5 was announced on Sept. 12, with pre-orders beginning Sept. 14, and shipments and availability in nine countries including the U.S. and Canada on Sept. 21. In other words, Apple could turn the tables on its skeptics very quickly.

Meanwhile, Apple Inc. (NASDAQ:AAPL) maintains a clear position as an industry leader and trades at a valuation so cheap, it’s hard to justify it. In fact, Apple trades on par with Dell, a company with revenue down more than 8% in the trailing 12 months.

Ratio Apple Dell Cheaper?
Price-to-earnings 10.6 12.5 Apple
Price-to-free cash flow 9.5 8.4 Dell

Baidu
The “Google Inc (NASDAQ:GOOG) of China” continues to trade at a remarkably conservative valuation after a massive 2012 and 2013 sell-off. Despite a 40% increase in first-quarter revenue from the year-ago quarter, Baidu.com, Inc. (ADR) (NASDAQ:BIDU) trades at a P/E of just 19.9.

So what’s the catch? Why is there such a huge disconnect between revenue growth and valuation? Baidu.com, Inc. (ADR) (NASDAQ:BIDU)’s net income was up only 8.5% as research spending and marketing expenses grew 83% and 77%, respectively, weighing on the company’s operating margin. Management is making heavy investments in software engineering hires and customer education, in addition to promotional events to drive mobile app installation.

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