You Should Start 'Nibbling' On Baidu And Alibaba, Here's Why

Shares of Chinese internet stocks Alibaba Group Holding Ltd BABA and Baidu Inc (ADR)BIDU are down significantly since last year and recently slumped heavily when the companies reported their respective last quarter earnings.

According to Daniel Niles, Senior portfolio manager at AlphaOne Capital Partners, this is the right time to start 'nibbling' on these stocks. Niles was on CNBC recently to explain why.

Search Is Still Growing

"We have been nibbling on Baidu after they reported, we have been nibbling on Alibaba after they reported because if you look at it search, still going to grow a lot in China, right?," Niles said. "There's still a lot more people that are going to come on to the internet. And so, it's kind of where Google was a decade ago let's say."

So Is Commerce

He continued, "And you look at commerce as well with somebody like an Alibaba, yes they are having problems right now, but the monetization is improving, mobile is continuing to grow and so, we think, they are getting to levels where it's interesting to start taking a very small position and I think, they may go lower in the summer."

Summer Will Present Better Opportunities

"We are actually down a little bit on our Baidu position...and that's what we are looking to do, is to add. But we think there will be better opportunities again deeper into the summer because again the stock got crushed because business wasn't good. So, that's what you need to focus on."