Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Why, Inc. (ADR) (BIDU) Might Not Be the Best Chinese Play

I’m going to attempt something a little odd today, Fools. Even though Chinese search engine, Inc. (ADR) (NASDAQ:BIDU) makes up 8.6% of my real-life holdings, I’m going to be giving you three reasons to consider selling, Inc. (ADR) (NASDAQ:BIDU) stock today., Inc. (ADR) (NASDAQ:BIDU)Why am I doing this?

Recently, Nobel Prize winner Daniel Kahneman visited Fool headquarters in Virginia. While visiting, he talked about how a number of different biases can lead us to believe we can predict the future with relative certainty. In reality, he argued, we’re just deluding ourselves.

It got me to thinking about how I don’t write enough about the risks of owning the stocks I own. So although I don’t plan on selling my, Inc. (ADR) (NASDAQ:BIDU) stock anytime soon, I think it’s healthy for me to practice and model this behavior.

1. “China” does not equal “America”
Many people, myself included, have often used Google Inc (NASDAQ:GOOG) as a proxy for how, Inc. (ADR) (NASDAQ:BIDU) would perform as it matures. Though Google Inc (NASDAQ:GOOG) is certainly a force outside the United States, it still got close to half of its revenue stateside last year.

That’s important, because it forces me to examine just how different China and the United States are. For starters, there is a vastly different regulatory system in place. While Google might sometimes find itself in the crosshairs of public scrutiny for privacy reasons,, Inc. (ADR) (NASDAQ:BIDU) is a whole different story. If the Chinese government wants information from the company, it’ll comply without thinking twice. That’s why Google decided to exit the country years ago.

Just as important is the evolution of mobile advertising. While Google has been able to develop a platform that delivers more ads at a lower price,, Inc. (ADR) (NASDAQ:BIDU) is still working on its strategy. There’s no way to tell if Chinese smartphone users will operate the same way Americans do, and it’s yet to be seen if Baidu’s massive investment in developing an effective mobile strategy will ever pay off.

2. Slowing Chinese economy
It’s no secret that demand from China has played a big role in helping the global economy pick itself up off the mat. Sooner or later, though, that growth has to slow.

Signs are suggesting that slower growth in China will arrive sooner than some are ready for. Manufacturing is actually contracting, and as the standard of living goes up for workers, companies are finding less incentive to set up shop in the Mainland. This means leaving for greener pastures in countries where wages are lower.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.