For well over a year now, I've done my level best to help the world invest better. Instead of just spouting out some opinions without any skin in the game, I've been backing up my picks in both my personal portfolio, and my All-Star CAPS profile.
I've set up a lump-sum retirement portfolio, which is beating the S&P 500 by 16 percentage points over the past year and a half, and a growth portfolio, which is beating the S&P 500 by nine percentage points so far in 2012.
But for those who want to be contributing regularly to their portfolios, I've also selected one stock per month that I'm throwing my Roth IRA money behind. So far, those picks haven't fared nearly as well as my other two portfolios, returning 3.6%, and trailing the S&P 500 by about the same margin.
Last week, I introduced you to three companies I was thinking about buying; today, I'll reveal which one made the cut. I'll tell you why I picked what I did and, at the end, I'll offer up access to a special premium report on my stock.
The easy one to cut out
After some careful consideration, it was actually pretty easy to eliminate one of the three stocks I was considering for this month: Qihoo 360 (QIHU.DL). Initially, I included the company because it seems to be giving Baidu (BIDU 1.86%) a run for its money as the go-to search engine in China. Qihoo also has a successful host of safety programs for Internet browsers, as well.
But, on the whole, there are just too many question marks that exist to make this the one stock I choose out of the entire investing universe. Earlier this year, the company received some unwanted attention in the form of a Forbes article, which questioned the company's accounting practices; and Qihoo has also been in the crosshairs of noted short-seller Citron Research.
To be clear, neither of these necessarily makes Qihoo a company with fraudulent practices; it just muddies the waters a little bit. And, with a market cap of just under $3 billion, and not even two years as a public company, I just think I can do better.
Which leaves me with a tough choice
The two companies that remain, then, leave me with a very difficult choice. Both Baidu and Apple (AAPL 1.62%) represent outstanding businesses that have demonstrated excellence in their fields -- and both are trading for what seems to be bargain prices.
Let's start with Baidu. China's largest search engine has executed awfully well in capturing an 80% market share in China. So far this year, the company has increased revenue by almost 60%, with earnings jumping 65%.
And yet, at the same time, the company's stock has fallen 40% since mid-April. There are three main culprits for this. The first is that investors are worried about competition from Qihoo. I'll grant that you always need to keep your eye on the competition, but I think it's way too early to be worrying, when Baidu has such a huge share of the growing pie of Chinese Internet searches.
The second concern is the fact that Baidu's transition to mobile searches will hurt the company's bottom line. As fellow Fools have already pointed out, mobile searches are adding to the total number of searches, not necessarily replacing the more-profitable searches made from desktop computers.
Finally, there are some inherent jitters when it comes to investing in China. Just this week, the SEC announced that it would be investigating the Chinese branches of the Big Four auditors to check for accounting irregularities. The news sent shares of Baidu, along with fellow Chinese Internet companies SINA (SINA) and Sohu (SOHU -1.21%) down. I'll admit, if there are irregularities uncovered, that would significantly change my thesis for Baidu.
On the other hand, we have Apple. I'll be the first to admit that, while there's little arguing that Apple has been the greatest company over the past decade, it doesn't have the sustainable competitive advantages that a Baidu has. While customer loyalty and high switching costs are nice, customers can be more fickle than we can imagine.
At the same time, other than the loss of Steve Jobs -- which should not be underestimated -- I have no reason to believe that the Age of Innovation is nearing an end at Apple. With iPhone and iPad sales potentially just scratching the surface abroad, and with the next iSomething presumably around the corner, there's really no telling what Apple might have up its sleeve.
Over the past year, the company increased revenue 45% and earnings 59% -- numbers that are just unheard of for a company Apple's size. At the same time, it now trades for just 12 times earnings, close to a record low for the company.
How to choose?
In the end, if I could, I'd most definitely be buying shares of both of these companies. But since I can only buy one, it's going to be Apple. The deciding factor is actually quite easy to explain. Currently, I don't own any Apple in my Roth IRA, while Baidu makes up 12% of the account.