Facebook's Evil Experiment
10 Stocks to Buy & Hold Forever
Facebook recently took a little heat when it was revealed that a couple of years ago, the company had experimented with users' emotions by varying the amount of positive or negative content in their status updates.
People don't like discovering that they've been used as guinea pigs.
But the fascinating thing about this experiment is that (presumably) half the people who were "used" should be happy about it!
In short, what the Facebook researchers found was that when Facebook showed users more negative posts, they were more likely to share negative status messages. Conversely, when Facebook showed users more positive posts, they were more likely to share positive statuses.
It's not surprising. A negative environment brings us down, while a positive environment makes us happier.
So what I'm wondering is why Facebook doesn't give people a choice. Why not ask people if they want more negative or more positive? And why isn't that the conversation that's resulted from this exposure instead of the exaggerated outrage at being used?
The media use us all the time, and that's no secret!
Interestingly, the whole topic reminds me of the trip I took to China a couple of years ago, when I made a practice of reading the complimentary copy of China Daily that our hotel provided every day.
China Daily, which is controlled by the Chinese government, was very clearly publishing positive stories that were designed to get its readers to feel good about the country.
These weren't stories of the problems we read about here, including pollution, corruption, racism and exploitation of workers.
These were stories about progress, about unity, about the path to a better future for all Chinese who contributed to the effort. And China Daily is still that way today.
Take a look at the online version and see for yourself.
Now contrast that with the typical headlines you find in our own leading news sources.
Just today the lead stories in The Wall Street Journal included:
Flood of Child Migrants Spurs State Backlash
Gazans Heed Israel Warning, Flee Homes
An Arc 0f Instability Unseen Since the '70s
The lead stories in The New York Times included:
U.S. Sees Risks in Assisting a Compromised Iraqi Force
After Lapses, C.D.C. Admits a Lax Culture
Rikers Study Finds 129 Inmates Seriously Injured by Employees in 11 Months
Dirty Tricks, Tea Party Suicide and Rising Mississippi Anger
If the finding from Facebook's experiment holds in a larger population-and I see no reason it shouldn't-readers of China Daily would tend to develop more positive attitudes about China while consumers of U.S. media would tend to become more negative overall.
But here in the U.S., we have a free press, and that press has learned that "if it bleeds, it leads." As a result, we wake up to a barrage of bad news every day.
And what do we do with this news?
Many of us try to digest it (knowing that complete understanding is an impossible task) and try to use our knowledge to make the world a better place, knowing the task is difficult.
But many of us choose to ignore it, and focus on our own little worlds.
Just last week, in fact, I stumbled onto this quote by E.B. White, one of my literary heroes.
"I arise in the morning torn between a desire to improve the world and a desire to enjoy the world. This makes it hard to plan the day."
So tell me.
Do you actually pay attention to all the bad news? And if you do, do you have the solutions that would bring peace and prosperity to Israel, Iraq, Afghanistan and Ukraine-as well as the Mexican border and Detroit?
Or do you ignore the bad news and focus on your own little world?
Your answers will be appreciated.
Speaking of China:
It's been nearly 10 years since we published the first issue of Cabot China & Emerging Markets Report, steering readers to the best growth investments and China and beyond.
We've helped a lot of readers take home big profits over the years, like these: Vipshop Holdings (VIPS) +94% BitAuto (BITA) +118% Qihoo 360 (QIHU) +75% Melco Crown (MPEL) +80%
And I'm still excited about the prospects for investing in Chinese stocks, because that's where the growth is!
Contrarily, I want nothing to do with France or Italy or Greece.
Sure, you may find some bargains in those shrinking European economies, but for my style of growth investing, China, the emerging markets and the U.S. are the most fertile grounds in the world.
So today, my recommended stock for part nine of my buy-and-hold series is one of the greatest growth companies in China.
10 Stocks to Buy and Hold Forever
The goal, remember, is not to identify stocks that can give you a decent long-term return, like Johnson & Johnson (JNJ) and DuPont (DD). You can hold those forever, but they won't make you rich.
I want to identify the next Amazon (AMZN), the next Apple (AAPL), the next Google (GOOG) and the next Keurig Green Mountain (GMCR).
To recap, the key attributes I look for are these:
A product or service or business model that is revolutionary.
A mass market.
A company that's still small enough to grow rapidly.
A company that is not respected-perhaps not even known-by the majority.
And last but not least, a stock that's trending up, indicating that investors' perceptions of the company are improving. This is important because perceptions are always at least as important as reality.
Which brings me to today's stock, number nine in the Series, "10 Stocks to Buy and Hold Forever."
Bidu is often called the Google of China, and that may be all you need to know about the stock.
Baidu was founded in 2000, two years after Google.
Baidu has annual revenues of $6 billion, while Google has $62 billion.
Baidu grew its revenues at a 59% rate in the latest quarter, while Google grew at a 19% rate.
Baidu grew its earnings at a 24% rate in the latest quarter, while Google grew at a 3% rate.
Thus Baidu is smaller than Google and growing faster.
And most important of all is the fact that the population of China is roughly four times as large as the population of the U.S.-which means that Baidu, one-tenth the size of Google today, is almost guaranteed to be larger in just a few years!
So let's look at the chart.
For the first five years of its life, BIDU was a hot stock, very volatile (mostly on the upside) and trading at nosebleed valuations-its PE topped 50 at some point in every year until 2012. But in recent years it's calmed down a lot.
First, from mid-2011 through mid-2013, there was a prolonged decline that slowly wore out uncommitted investors.
Then there was the rebound in the second half of 2013; it rewarded investors/traders who were nimble-but it didn't last. 2014 brought a renewed consolidation phase that took the stock down as much as 23% at the low of the growth-stock correction.
Since the market's April bottom, however, BIDU has rallied back with the broad market. Two weeks ago, it broke out above 190, to all-time highs. And now it's pulled back a little.
Note: like many stocks in this series, BIDU was much lower when originally selected back in early May. It's not quite the bargain it was then; in fact, downside risk is greater.
But keep your long-term prospects in mind if you truly want to treat this as a buy-and-hold-forever stock. If you do, feel free to get on board now.
Otherwise, I recommend that you take a no-risk subscription to Cabot China & Emerging Markets Report, which is where Paul Goodwin originally recommended BIDU (last July when it was trading at 110). If you do, you'll not only get regular updates on BIDU, you'll also get Paul's thinking on all the best China stocks.
Yours in pursuit of wisdom and wealth,
Chief Analyst, Cabot Stock of the Month
Publisher, Cabot Wealth Advisory