Sogou IPO

May 31, 2018

Hi Traders! It's Ashley, the new self proclaimed IPO queen. Another Chinese tech company you say?! Don’t worry I picked a search engine this time, not a streaming site. I felt like we should mix things up. ;)

Sogou, Inc is a Chinese company headquartered in Bejing, China, responsible for developing the Sogou search engine, input, and browser. Sogou literally translates to "Searching Dog" which if you know me, if it has dog in it, I already like it.

While all three of Sogou's components have extreme potential, so far, their language input tech is already renowned. It boasts the #1 spot of all the input systems. Sogou is most proud of their AI (Artificial Intelligence) which studies the patterns of it's users to finish sentences at breakneck speeds. Think of it much like Google, predicting what you will say. Interestingly, in 2007, Sogou won a patent infringement case in which Google stole pieces of their IME. What is IME you might ask? Well my friend, I have looked that up! Short for Input Method Editor, is an operating system component or program that allows any data, such as keyboard strokes or mouse movements, to be received as input.

As far as Sogou's search engine and browser, they currently have 10 billion indexed pages! While 10 billion pages seems like a lot, let me throw some more knowledge your way. Our buddy Google, has over 130 TRILLION indexed pages. That means like at least a billion of those have to do with cat memes, right? Side note: This is one of Jerremy's favorite videos on the internet. The secret is out. ;) https://www.youtube.com/watch?v=-5Rka0TyrYw

Ten billion isn't that bad if you think about it. China's internet is extremely restricted thanks to the government, so without those rules I can imagine those indexed pages would be closer to Googles status!

Very recently also, Sogou has begun integration measures with the infamous WeChat! "WeChat is a Chinese multi-purpose messaging, social media and mobile payment app developed by Tencent." Which speaking of Tencent, surprise surprise, Tencent owns 42% of Sogou. They seem to have their fingers in pretty much all of the up and coming, successful Chinese tech companies. This partnership has the potential to be HUGE for Sogou. With the backing of Tencent and the upcoming integration with WeChat it seems inevitable that Sogou will make a name for itself soon.

Which brings us to Sogou's competitors! Right now Sogou is said to be the number 2 search engine right behind Baidu in China. Surprisingly they are already profitable, too! As of October 2017, 90% of Sogou's revenue came from search engine related advertising. As far as search engines go, Baidu and Sogou are pretty much the same. They have extremely similar tech so much so that these two have been playing "lawsuit ping-pong" for the last several years for patent and IP infringements.

Again, thanks to it’s part-Tencent ownership many are extremely optimistic that Sogou has what it takes to overtake the front runner Baidu. So what is holding them back? Well, Baidu has been around for a long time, and it does what it needs to do. Humans are creatures of habit and switching now seems unnecessary. Sogou hopes to create a fun, intuitive, and almost stupidly easy to use interface that will make users WANT to switch. I am hopeful that with the current path, this will not be a Bing part two. 

Speaking of 'being around for a while' here is a weekly chart on BIDU. You can see it generally trends higher over time and I don't specifically see any reason for that to change. Here was some killer analysis Jerremy did a few months back on it. 

From here BIDU is forming a very nice pennant and this one could break either way. If it breaks bearish, one could play it quickly to the downside and then look to capture that dip buying area and zone around the $210 spot. 

Now, what about Sogou? 

Well, what' super interesting is that since it's IPO, it's been trending downward. Jerremy has this unique theory that the NYSE will simply not allow an IPO of less than 3 years just GO to zero. That would look like they didn't properly prepare or investigate the company. And, since we have been on an absolute tear with the recent analysis of these newer Chinese IPO companies, Jerremy and I figured, let's attempt to keep this solid win streak alive! 

Here is SOGO's daily chart. 

It's pristine. SOGO has formed a nice support, and is now consolidating at the 100 SMA. Keep  your eyes and brokers ready for either a pop out or a rotation back down into support, where a nice buy low area should come in. 

Long term, I'm not blown away by SOGO. Short term... we at Real Life Trading can make money off of anything, with a good plan, discipline, 'paytience', proper risk mitigation and with the help of Mr. Squiggles. 

Thank you for reading. 

- Ashley

"The biggest challenge is to stay focused. It's to have the discipline when there are so many competing things." Alexa Hirschfeld