Andreas Halvorsen (Trades, Portfolio) is a founding partner of Viking Global Investors LP and currently serves as its Chief Investment Officer. Prior to founding Viking, Halvorsen was a senior managing director and the director of equities at Tiger Management LLC. He also worked as an investment banker in the corporate finance and merger departments of Morgan Stanley. Halvorsen received his MBA from the Stanford Graduate School of Business in 1990 and graduated from Williams College in 1986. His Viking Global Equities III fund has gained 22% on average per year from 1999-2009.
His fund has a meaningful stake in Chinese technology giant Baidu (BIDU, Financial). As of the last quarter his fund was holding more than 2.89 million shares of the company making it the fund's largest tech position. Baidu, Inc. is a Chinese-language Internet search provider. The company offers a Chinese-language search platform on its website, Baidu.com, to enable users to find relevant information online, including Web pages, news, images, documents and multimedia files, through links provided on its Websites.
From PC-centric company to mobile-first company
Over the last two years, Baidu has more than doubled its revenues from 3.5 bn to 7.9 bn. Much of these growth has come from the company's transformation from a PC-centric company to a mobile-first company. The company is now a market leader in mobile search, mobile maps and app distribution in China. In addition, Baidu has a broad portfolio of apps in video, travel and other verticals. The company's focus on mobile helped it re-accelerate its topline and its full-year revenue grew 54% year over year in 2014.
The company's mobile search traffic exceeded PC search during the second half of 2014, and it continues to increase as a portion of overall search traffic. Mobile monetization continued its momentum and increased to 42% of total revenue in Q4 2014. during the same period, daily mobile searches per user increased by 22% year over year. In December 2014, for the first time, search revenues from mobile surpassed that from PC.
The company continues to invest in making its search faster, more relevant, more visual, more personalized and more real-time. In November, Baidu launched personalized results, returning tailored, more relevant search results. The company made instant search faster and more relevant than before, further improving the Baidu user experience and helping increase page views and click-through rates. Overall, Baidu's key monetization metrics, like the number of paid clicks, click-through rates, cost per click continues to trend in right direction.
Baidu platform
Going forward, the company is beginning next phase of growth in 2015 where it plans to enable users to discover, connect and transact, all through Baidu. Whether it is buying movie ticket or tickets to local attractions, hailing taxis and private cars, booking hotels, purchasing group-buying offers, or ordering for delivery – all can be done through Baidu platform.
In the past year, the number or transactions completed on Baidu platform has grown over fourfold. In each of its categories, Baidu created value for users by delivering a better experience through closed-loop transactions. In 2014, Baidu also solidified the gateway dominance of mobile Baidu and mobile maps, adding new product features, such as Discover (DFS, Financial) and Nearby, to offer better local services to its users. The company also rolled out new key offerings, such as Baidu Connect, Baidu Wallet and Baidu Foot Delivery in 2014. The company plans to focus on driving adoption of its closed-loop offerings in 2015.
Valuation
Baidu is a fast-growing company. According to sell side estimates, its sales are expected to rise 39% in the current year which is almost comparable to that of Facebook's (FB) 37%. However Facebook is trading at a significantly higher Price to Sales multiple as compared to Baidu. While Facebook's P/S multiple is 17.82, Baidu is trading at a P/S multiple of 9.12. This low relative valuation, as compared to other fast-growing internet peers, makes Baidu a favorite among sell side analysts. Out of 29 analyst covering the company, 27 are positive and have buy rating and two have hold ratings. I believe the company is a good buy given its strong growth prospects.
