Here’s Why You Should Hold Baidu (BIDU) Despite Challenges

Ariel Investments, an investment management company, released its “Ariel Global Fund” first-quarter 2024 investor letter. A copy of the letter can be downloaded here. In the first quarter, the Ariel Global fund appreciated +7.35% lagging behind the +8.20% gain of its primary benchmark, the MSCI ACWI Index, but ahead of the +6.85% return of its secondary benchmark, the MSCI ACWI Value Index. The upward rally of developed markets continued in the first quarter of 2024. The rally was driven by investors' excitement over artificial intelligence (AI), a rebound in bank lending growth, decreased energy costs, a rise in global manufacturing activity, recent structural reforms in Japan, and the near-term possibility of a rate-cutting cycle in the U.S. and Europe. In addition, you can check the top 5 holdings of the fund to know its best picks in 2024.

Ariel Global Fund highlighted stocks like Baidu, Inc. (NASDAQ:BIDU), in the first quarter 2024 investor letter. Baidu, Inc. (NASDAQ:BIDU) is an internet services provider in China. The one-month return of Baidu, Inc. (NASDAQ:BIDU) was -16.52%, and its shares lost 36.80% of their value over the last 52 weeks. On June 13, 2024, Baidu, Inc. (NASDAQ:BIDU) stock closed at $93.99 per share with a market capitalization of $33.213 billion.

Ariel Global Fund stated the following regarding Baidu, Inc. (NASDAQ:BIDU) in its first quarter 2024 investor letter:

"Alternatively, several positions weighed on performance. China’s internet search and online community leader, Baidu, Inc. traded lower alongside Chinese equities as intensifying problems in China weighed on investor sentiment during the period. The company continues to invest heavily in Artificial Intelligence (AI) and recently launched its generative AI, Ernie Bot, aimed at rivaling Open AI's ChatGPT. While monetization of the new technology is largely dependent on regulatory review, we think Baidu should continue to experience margin improvement with the ongoing implementation of efficiency and profitability initiatives. While some investors remain on the sidelines due to uncertainty surrounding China’s economic growth, government regulations, and the political rhetoric towards Taiwan, we remain enthusiastic about Baidu’s longer-term opportunity for revenue growth and margin expansion across internet search, cloud, autonomous driving, artificial intelligence and online video."

A modern internet space with a person using Baidu services on a laptop.

Baidu, Inc. (NASDAQ:BIDU) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 48 hedge fund portfolios held Baidu, Inc. (NASDAQ:BIDU) at the end of the first quarter which was 48 in the previous quarter. In the first quarter total revenue of Baidu, Inc. (NASDAQ:BIDU) increased 1% year-over-year. While we acknowledge the potential of Baidu, Inc. (NASDAQ: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 timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we discussed Baidu, Inc. (NASDAQ:BIDU) and shared the list of undervalued cyclical stocks to invest in according to analysts. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.