My Two Top Stocks: Panera Bread and Baidu

Let's get straight to it.

Well, they're the only two stocks I own at the moment, and I couldn't feel more at ease holding them.

Why Panera Bread?
After buying Panera Bread  (NASDAQ: PNRA  ) for around $129 -- more or less its high in the summer of 2011 -- you can understand my surprise when the company shed 20% or so of its value. I had inklings of selling the stock early, but I held on because of three things I knew at the time:

1. The company was among the healthiest -- if not the healthiest -- food options.

2. Ronald Shaich was fanatical about growing Panera.

3. Panera Bread had become a "fourth place."

On the first point, I'm not sure if I have to explain. Googling for a few minutes, you'll find plenty of reviews touting Panera as the "Healthiest Fast Food Restaurant." In fact, in 2008, Health.com rated it America's No. 1 Healthiest Fast Food Restaurant.

Second, Panera Bread has Ronald Shaich, its talented founder, chairman, and co-CEO. For those who don't know, before founding Panera Bread in 1993, Shaich co-founded another bakery-cafe chain, Au Bon Pain, in 1981. Now, the history is a bit detailed, but the main takeaway is that Shaich has been in the fast-casual restaurant business for decades. He knows what works and what doesn't.

Finally and most important, Panera Bread is the only other place I consider workable. You know how Starbucks is famed for creating a "third place" between work and home, a place where you can study, talk with friends, relax? Well, sometimes I need a little more than coffee, and sometimes I'm just deathly tired of going to the same old Starbucks everyday. Panera Bread is the "fourth place."

So should you buy Panera today? Well, maybe. For me, I wouldn't.

I still think the company has a great management team as Shaich still holds the same positions. However, the company's product value has declined, in my opinion. Not only do the portion sizes at Panera Bread seem smaller (or they've always been that size and I've grown larger), but the food doesn't have the same finesses or hearty feel it used to.

I am holding onto my Panera shares, though. The company trades at a premium 28 P/E and the company continues to push its stock price higher. Though this may be a risky time to hold, I don't think there's any other restaurant that comes close to being a "fourth place."

Panera Bread makes up $986 of my portfolio.

Why Baidu?
I bought Baidu (NASDAQ: BIDU  ) in February at about $96. Since then, the company has shed more than 8%. However, I'm more bullish than ever.

I bought into Baidu because it commanded more than 70% of China's search market even as competition spiked in 2012. Moreover, Baidu has been around for more than a decade; the company just knows so much about Chinese Internet users. And similar to Google search, Baidu search gets smarter and smarter as people use it. As the country's dominant search engine, it's hard to see any company come close to Baidu's 13+ years of user data to make search better.

So even though Qihoo  (NYSE: QIHU  ) continues to gain market share in the search space, I have no fears that Baidu won't come out on top. Perhaps the best way to put it is this: Like other Fools, I think the market tends to underestimate the advantage of first-movers and top dogs.

Notwithstanding Qihoo's weaknesses, I think the search market has been decided for some time now.

Now, that only leaves mobile concerns. On that, all I can say is that (1) again, Baidu is best poised to make the transition as it's one of the few companies with more than a decade of experience tailoring products to consumer habits. You can bet that CEO Robin Li is going to throw all the money he can to make mobile work.

I'm considering buying more shares.

Baidu makes up $877.50 of my portfolio.

 

Panera Bread and Baidu are my top two stock holdings, but our co-founder, Tom Gardner, recently revealed his top two stocks as well. For the names of that surprising pair of companies, just click here.


Read/Post Comments (3) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 13, 2013, at 12:21 AM, secularinvestor wrote:

    There has been much misinformation about BIDU's competition from QIHU.

    In fact most of QIHU's rapid search growth has come from them launching their own search engine in August 2012 and then diverting search traffic from their sites away from Google to their own search engine.

    Google is the loser not BIDU.

    see

    seekingalpha(DOT)com/article/1113641-qihoo-vs-baidu-which-is-the-better-play-for-china-s-online-search

  • Report this Comment On March 13, 2013, at 6:21 AM, TMFKang wrote:

    Hi secularinvestor,

    I actually share your sentiment -- as does fellow Fool writer Rick Munnariz.

    Check out his detailed piece on Qihoo's impact on Google here: http://ow.ly/iRm8q

    Nonetheless, even though Google is the biggest loser, that doesn't negate the argument that Baidu has to watch out for Qihoo.

    Best,

    Kevin

  • Report this Comment On March 13, 2013, at 8:13 AM, secularinvestor wrote:

    Thanks Kevin,

    I believe QIHU's threat is over hyped.

    BIDU are very strong in online search with around 78% market share and 480,000 large and SME advertising customers *(compared to QIHU apparently with only 160 SMEs?)

    However, BIDU do need to expand their share of mobile search from around 35%. Their deal with Apple will help. According to StatCounter Apple has the largest share by vendor of Chinese mobile web browsing, with around 16.5%% share and climbing, compared with Samsung with 14.15% share (Samsung are still tied in with Google, but that might change as they are the biggest threat to Google?

    Can BIDU do similar deals with other OEMs in China such as HTC (6.96% browsing share) Huawei (6.37% share), Lenovo (4.07% share) ZTE (3.25% share)?

    And/Or they could reach deals with the Chinese carriers. Most of Android in China is forked (70% to 80%) according to MIT Research) so the carriers could easily put some bloatware on top and direct searches through BIDU.

    Additionally Baidu might buy one or two of its competitors?

    I wonder what you guys at Motley Fool think of how BIDU can gain mobile market share?

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