If you bought Google stock – now Alphabet Inc. (NASDAQ: GOOGL) – back in 2010, you’re undoubtedly pleased with your decision.

Every thousand dollars invested in GOOGL at that time is worth over $4,300 today.

For those who didn’t make that investment, though, there’s no need to kick yourselves over it. We’ve got an opportunity to reap gains of more than 300% from the next up-and-coming Internet search giant.

To do that, we don’t have to travel back in time.

We just have to travel across the ocean… to China.

Over the last eight years, U.S. Internet users grew about 23.7% to 275 million, according to Statista.

But with over 75% of the country’s population online, there isn’t much room left for growth.

Our total user base is only expected to grow about 6% between 2015 and 2022.

China is another story, though. You might have heard recently about the country’s economic slowdown, but GDP is still expanding at a 6.6% annual pace – a figure more than double the United States’ 3%.

More importantly, China’s 802 million Internet users only represent 57.7% of the country’s total population.

There’s still plenty of untapped potential there. Statista projects China’s Internet user base to grow by 22% between 2015 and 2022 – almost quadruple the pace of the United States.

That means a couple hundred million more Chinese users in the next few years.

Maybe you can see why Money Morning Chief Investment Strategist Keith Fitz-Gerald says it’s time to forget the “FANGs” – that handful of American tech giants, including Alphabet (whose old name is represented by the “G” in “FANG”).

Instead, Keith says we need to start looking at their Chinese equivalents, which have major growth spurts ahead of them.

But a number of indicators – including China’s growth in Internet users – suggest one company in particular is headed for the biggest growth of all.

That’s probably why it just received a top score from our Money Morning Stock VQScore™ system.

And you can get it for a small fraction of the price of Alphabet stock… for now, anyway.

Why the “Google of China” Is a Better Bet Than Alphabet
Money Morning readers may already know that some of the best stocks to buy in 2019 are the “BAIT” stocks.

That’s the acronym for four of the biggest tech companies in China.

  • Baidu Inc. (NASDAQ: BIDU)
  • Alibaba Group Holding Ltd. (NYSE: BABA)
  • iQiyi Inc. (NASDAQ: IQ)
  • Tencent Holdings Ltd. (OTCMKTS: TCEHY)

It’s hard to go wrong with any of these four stocks. But the one whose profit potential really stands out to us – and our scoring system – is Baidu.

It’s become commonplace to refer to these Chinese companies by their American counterparts. So you might hear Alibaba called the “Amazon of China,” or iQIYI called the “YouTube of China.”

And Baidu would be called – you guessed it – the “Google of China.”

That’s in large part because of its Internet search engine, which holds a 70% share of the Chinese market. It’s the most widely used search engine in the world after Google, and the fourth most-visited website overall, according to Alexa Internet.

And like Alphabet, Baidu has expanded into a wide array of tech segments, including cloud services, self-driving vehicles, and artificial intelligence.

Baidu’s AI platform, DuerOS, can turn virtually any product into a smart device that can converse with users in natural language. With applications including refrigerators, TVs, robo-vacuums, door locks, fitness trackers, and thermostats, DuerOS reached an installed base of over 140 million devices in September. That’s up 40% from the previous quarter.

The comparison between Baidu and Alphabet also holds up when we consider streaming video.

Just like Alphabet owns YouTube, it was Baidu that founded the YouTube of China, iQiyi. And it still holds a 70% share of the streaming video company, with 93% of voting rights.

In other words, your shares in Baidu give you two BAIT stocks for the price of one.

Where Baidu really stands apart from Alphabet, though, is its room for growth. This is a company with a market cap around $57 billion – less than 8% of Alphabet’s – with a rapidly expanding target market.

Baidu shares have slipped along with the rest of the big tech stocks in recent months – they are more than 40% off their 52-week high. But Keith Fitz-Gerald explains that Baidu is “generating a ton of cash.”

That presents a lucrative opportunity for smart investors. Locking in that discounted price now is like having a time machine to go back and grab a FANG stock on the rise.

Now Is the Time to Buy BIDU
Revenue in Baidu’s most recent quarter was up 27% from a year earlier, and net income grew 56%.

According to FactSet, earnings per share (EPS) is set to increase more than 55% over the next two years.

Baidu has an outstanding track record with its cash flow, too. Net operating cash flow was up 43.5% in FY2017. That line item has increased every year since 2008 – including during the global recession – from $233 million to $4.9 billion.

That’s a nearly 2,000% rise in a decade.

Wall Street has definitely taken notice of Baidu’s value. Twenty out of 28 analysts tracked by FactSet rate the stock a “Buy” or “Overweight,” with an average price target more than 50% higher than its current price.

Some are more optimistic than that: Morningstar Equity Research set its target at $322 – double its current value.

That’s in line with the stock’s trailing price/earnings ratio of 12.42, which is less than half the industry average.

You can certainly buy shares of Baidu and bank some quick gains if you prefer. But as far as long-term plays go, it’s hard to get much better than this one.

Grab your shares now, and a decade from now you can brag that you got in on this stock before it really took off.

— Stephen Mack

Source: Money Morning