We recently compiled a list of the 18 Best 52-Week Low Stocks to Buy Now According to Short Sellers. In this article, we are going to take a look at where Baidu, Inc. (NASDAQ:BIDU) stands against the other 52-week low stocks.
Buying low and selling high is a popular investment strategy that value investors inspired by Warren Buffett have perfected over the years. The legendary investor has consistently emphasized the importance of identifying stocks of undervalued companies with significant growth prospects and holding onto these investments for an extended period.
Some of the most undervalued stocks to buy are those trading near their 52-week lows, backed by solid underlying fundamentals. A lot of these companies have durable competitive advantages but have fallen due to an overreaction by pessimists to short-term headwinds. The companies should boost strong brands in their respective fields with high barriers to entry.
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Value investing means paying attention to more than just the stock price but by focusing on valuation. A pullback often creates buying opportunities where quality companies become available at low price-to-earnings multiples or low price-to-sales ratios relative to their industries.
Over the past 20 years, 95% of investment firms have failed to beat the S&P 500. In contrast, Buffett has averaged an annual return of 20%, nearly double the S&P 500 over the same period.
With the S&P 500 up by about 20% for the year, most stocks are trading at premium valuations above their 52-week highs. The impressive gains have come amid unfavorable market conditions, with interest rates near all-time highs of between 5.25% and 5.50%.
On the other hand, some stocks have pulled back significantly and are currently trading close to the 52-week lows, their core business hurt by the high interest rate environment. Additionally, some of the stocks have underperformed due to deteriorating macroeconomics. Concerns that the U.S. economy could plunge into recession have always hurt some of the stock’s sentiments. The U.S. Federal Reserve is expected to cut interest rates in September and these stocks might not be near their lows for long.
According to Stuart Keiser, Citi head of equity trading strategy, the high interest rate environment has left the market in a very unstable situation amid a “ tricky environment.” Likewise many investors are on edge as to whether there will be a soft or hard landing. Keiser said, in an interview on CNBC’s Fast Money:
“Basically you had a 12 to 18 month period of positive economic surprise of what I would call higher for longer growth strong rate cuts getting pushed out. Markets were able to deal with that because growth was really positive. Since late June economic data surprised negative, economic data momentum negative. The market is now trading instead of higher for longer trading, a bit of growth slowdown. That’s why you are getting this schizophrenia because as growth decelerates you get into a borderline at which the risk becomes really big that you could go hard landing instead of soft landing. So our view is that the risk reward is not what it was a couple of months back”
Amid the market outlook uncertainty, focusing on stocks near the 52-week lows is a sure way of balancing the risk reward amid the premium valuation in play. While the focus has been on artificial intelligence investment plays, stocks in various sectors are trading at discounted valuations and are sure to offer significant returns.
Our Methodology
To compile the list of the best 52-week low stocks to buy now, according to short sellers, we first screened for stocks that were trading near their 52-week lows (0-10% range) using the Finviz stock screener. Next, we looked at their short interest and picked the stocks with the lowest short interest that were the most popular among elite hedge funds. The stocks are ranked in descending order of their short interest.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A modern internet space with a person using Baidu services on a laptop.
Baidu, Inc. (NASDAQ:BIDU)
52 Week Range: $79.68 – $151.00
Current Share Price: $84.82
Number of Hedge Fund Holders: 42
Short interest rate: 2.72%
Baidu, Inc. (NASDAQ:BIDU) is one of China’s biggest internet giants specializing in providing search services. It offers the Baidu App to access search, feed, and other services using mobile devices; Baidu Search to access its search and other services.
Baidu, Inc. (NASDAQ:BIDU), the preeminent search engine in China, generates a significant portion of its income through advertising. It has also set out to strengthen its growth opportunities by investing in artificial intelligence to strengthen its product portfolio.
In recent years, it has augmented its investment in artificial intelligence as a strategic move towards becoming an A.I. company. Baidu, Inc. (NASDAQ:BIDU) asserts that its leading role in artificial intelligence within China positions it favorably to maneuver through a growingly competitive landscape despite noting a decrease in quarterly revenue.
Ernie, Baidu’s expansive language model platform, often heralded as a formidable competitor to OpenAI’s GPT, has been integrated into various application services to enhance the user experience. The platform manages over 600 million requests to its A.I. system daily, which Baidu asserts is the highest recorded among Chinese entities.
The company’s Ernie platform processes over 600 million requests to its A.I. system daily, a figure Baidu attributes to being the highest among Chinese entities. In pursuing artificial intelligence advancements, it has also increased its investment in autonomous vehicles. The company’s Apollo Go robotaxis are now operational in several Chinese cities, boasting the largest fleet of vehicles at 500 in Wuhan.
Regarding its online marketing efforts, which are its main source of income, there was a 2% drop to $2.7 billion in the second quarter. This drop suggests a slowing Chinese economy, currently recovering from a slump in the property sector. This environment has made advertisers more careful with their spending.
Baidu, Inc. (NASDAQ:BIDU) is one of the best 52-week low stocks to buy now according to short sellers, as it trades at a discount with a price-to-earnings multiple of 8. On the other hand, the percentage of shares short as of the end of July stood at 2.72%.
At the end of June, 42 hedge funds tracked by Insider Monkey held stakes in Baidu, Inc. (NASDAQ:BIDU), down from 48 in the previous quarter.
Overall BIDU ranks 11th on our list of the 52-week low stocks to buy now according to short sellers. While we acknowledge the potential of BIDU as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BIDU, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
