Being the top search engine in China is paying off stateside for Baidu.com
It's not the kind of feverish pop that a company typically gets when it is promoted into the more heavily mimicked S&P 500, but it'll do. Baidu is the first Chinese company to be added to the tech-stock-intensive index, a move that validates both China's securities and Baidu's own stature in the tech world.
Baidu has earned its place among the tech-stock elite. In the world's most populous nation, not even Google
The Nasdaq 100 nod doesn't mean that Baidu will feel more relevant to English-speaking search-engine users. The company recently entered the Japanese market, but it has little reason to expand into more competitive Western markets.
Why should it, really? There will be plenty of growth within China itself over the next several years. Internet penetration in China stood at a mere 12.3% over the summer, and less than a third of that connectivity is through speedier broadband access.
Obviously, there are plenty of geopolitical risks here. Valuation hounds will also point out that Baidu is not cheap, at 96 times next year's profitability. However, Baidu's torrid growth and wide margins made this an easy recommendation for the Motley Fool Rule Breakers newsletter service last year. The shares have gone on to more than quadruple since then.
That's fine. Opinions are supposed to differ. If everyone were a bull on Baidu, who would be left to buy in?
Oh, that's right, Nasdaq 100 Index buyers will. If you're buying in through exchange-traded funds like the PowerShares QQQ
Baidu has been recommended to Rule Breakers readers. Yahoo! has been recommended to Stock Advisor subscribers. Microsoft is an Inside Value selection. Why are you missing out on these great stock picks? The answer may be waiting in your free 30-day passes to any or all of the newsletters.
Longtime Fool contributor Rick Munarriz has been a fan of China's growth stocks for several years now, even though he does not own shares in any of the companies in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.