We recently compiled a list of the 10 Best Emerging Markets Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Baidu, Inc. (NASDAQ:BIDU) stands against the other emerging markets stocks.
Emerging markets stocks are shares of companies based in developing countries – think Brazil, India, China, or South Africa – that are rapidly industrializing and growing their economies. Unlike the familiar and more predictable world of US stocks, emerging markets offer something quite different: higher growth potential coupled with greater volatility, influenced by unique local dynamics such as political shifts, currency swings, and evolving regulations. Why venture into these turbulent waters? Because with higher risk comes the potential for higher rewards. These markets often grow faster than mature economies, making them especially attractive if you’re looking to diversify beyond the stability (and sometimes slower pace) of US equities. Also, exposure to the best emerging markets stocks would not only boost the return profile of a portfolio, but also make it less volatile through diversification – many emerging markets exhibit little to no sensitivity to the state of the economy in the US, meaning that their national economy could continue to grow even when the US is in a recession.
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Timing matters, especially when diving into emerging markets stocks. Investing in these companies makes the most sense when global economic conditions are improving, investor sentiment is optimistic, and local political or financial uncertainties are settling down. It’s particularly appealing if you’re a patient investor who can withstand short-term volatility for potentially bigger long-term gains. Additionally, when valuations in developed markets like the US are stretched and growth appears limited, emerging markets stocks can offer a refreshing alternative, giving your portfolio both growth exposure and geographical diversification.
The current tendencies we see in the global markets are highly suggestive that a potential rotation from US stocks to emerging markets stocks would be the right move to make. Despite the US market being in correction mode, valuations still appear stretched, as the whole market trades at a forward P/E above 20x, significantly above the historical average, which is around the mid-teens. This is the first factor that points toward the possibility that US stock market returns will be lower until the end of the decade due to the impact of declining valuations (or, call it a return to more normal valuations). Second, the new Trump 2.0 administration introduced a lot of noise into the US economy – the Atlanta Fed has already lowered its GDP growth estimates for the following quarters as a result of significant cuts in public spending as well as the tariff threats negatively impacting the private spending outlook. This expected economic slowdown is exclusive to the US market, while emerging markets may continue to grow their economies at a usual pace.
Finally, the potential impact of the upcoming reciprocal tariffs on April 2 is still not completely understood by the markets. What is certain is that the tariff threats have already caused inflation in some products, such as construction materials, copper, and other commodities, as businesses rushed to stockpile raw materials and inventories at cheaper prices before tariffs were enforced. Higher inflation, especially in core products like housing, is not good for the economy, as it pressures consumers and erodes their spending power. Higher inflation may also reduce the chances that the FED will lower interest rates any time soon, which is another impediment to economic growth. The key takeaway for readers is that the aforementioned headwinds and threats are mostly exclusive to the US market, while most of the emerging markets are likely to be impacted much less.
A modern internet space with a person using Baidu services on a laptop.
Our Methodology
We shortlisted 20-30 emerging markets stocks that are based in and derive most of their revenue from emerging countries. Then we compared the list with our proprietary database of hedge funds’ ownership and included in the article the top 10 stocks with the largest number of hedge funds owning the stock as of Q4 2024. All stocks are ranked in ascending order.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 50
Baidu, Inc. (NASDAQ:BIDU) is a Chinese multinational technology company specializing in internet-related services and AI. Headquartered in Beijing, BIDU operates China’s leading search engine, offering services such as web search, news aggregation, image and video searches, and a user-generated encyclopedia known as Baidu Baike. Beyond its core search business, the company has diversified into AI-driven initiatives, including cloud computing, autonomous driving technology, and conversational AI models like Ernie.
Baidu, Inc. (NASDAQ:BIDU) reported modest YoY growth in core revenue in the latest Q4 2024, reaching RMB 27.7 billion. The AI Cloud division was a standout, with revenue rising 26% compared to the previous year, helping to counterbalance weaker performance in the online marketing segment. Its AI model, ERNIE, continued to gain traction, with daily API usage costs hitting 1.65 billion in December and external API costs surging 178% from the previous quarter. BIDU also made progress in its search business, with AI-generated content now appearing in 22% of search results. In autonomous driving, the Apollo Go service delivered roughly 1.1 million rides in Q4, up 36% YoY, and achieved full driverless operation across the country.
Looking ahead, Baidu, Inc. (NASDAQ:BIDU) anticipates a gradual recovery in advertising revenue, expecting the first half of 2025 to outperform the previous quarter, with further gains in the second half. The company also plans to speed up its share repurchase efforts, having already bought back over $1 billion in stock since the start of 2024. Despite recent short-term sluggishness, the accelerating guidance and exceptional growth momentum in AI makes BIDU one of the best emerging markets stocks to consider.
Overall BIDU ranks 6th on our list of the 10 best emerging markets stocks to buy according to hedge funds. 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 time frame. If you are looking for an AI stock that is more promising than BIDU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
