Baidu.com, Inc. (ADR) (BIDU): Is This Fundamental Trend a Silent Stock Killer?

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A Rare Exception

Companies such as Baidu and Qihoo continue to show the struggles that Chinese stocks face. While these two companies were used as examples, this trend can be seen in just about every high-profile Chinese tech company.

YY Inc (ADR) (NASDAQ:YY) is one of the only companies that I’ve identified as operating against this trend, and its stock has been rewarded with gains of 250% since its November 2012 IPO. YY Inc (ADR) (NASDAQ:YY) operates like a YouTube but also has a touch of Facebook Inc (NASDAQ:FB) and Zynga with a social media and gaming platform. They grew revenue 130% year-over-year in their most recent quarter, but also saw a 1,715% gain in net income during the same period.

The primary reason has been a steady increase of operating income that exceeds revenue growth. The company’s ability to manage costs while producing growth might make it a diamond in a rough Chinese tech market.

Conclusion

Chinese tech stocks are on the rise after Baidu.com, Inc. (ADR) (NASDAQ:BIDU)’s quarterly report, and rightfully so. The company did beat quarterly expectations, and it’s possible that similar companies could follow its lead this earnings season.

My look at costs is not an overnight stock killer, but long-term; it could affect the returns of these stocks. Therefore, while assessing this space for potential investments, keep in mind the costs that could weigh heavily in the future.

The article Is This Fundamental Trend a Silent Stock Killer? originally appeared on Fool.com and is written by Brian Nichols.

Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Baidu. The Motley Fool owns shares of Baidu. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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