Ron Baron Portfolio Magic: Building Your Financial Future

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Jacob Wolinsky
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Ron Baron is an investment veteran known for his long-term growth strategy. He focuses on picking out small and mid-size companies with growth potential and competitive advantages. Currently, Ron Baron’s portfolio is highly diversified with a total of 323 holdings valued at $37 billion.

His biggest holding is Tesla, followed by Gartner, Arch Capital Group, and Costac Group (CGC). The tech sector takes the largest part of his portfolio, while companies from finance, healthcare, and consumer discretionary are closely following.

Ron Baron’s fruitful career started in 1970. He worked in different brokerage firms until 1982 when he founded Baron Capital Management. His flagship fund, the Baron Growth Fund was founded in 1994. Since then it has delivered annualized returns of 20.15% when compared to the Russell 2000 Growth Index’s 17.01%. To better understand the key to his success we will dive into his current portfolio, and discuss his investment philosophy.

Key Holdings

  • Tesla Inc (NASDAQ:TSLA) with 10% of the portfolio

Tesla has been one of the key Baron’s holdings for more than 15 years. He currently owns 17.7 million Tesla shares. During 2023 he traded them three times, and the current value of this holding is $3.7 billion. When we take into account that Baron invested in it just $305 million, we can see that the current gain is an astounding 1113%. The majority of stocks he bought between 2013 and 2016 when they were valued between $13 and $25, while their current value is $209.14.

  • Gartner Inc (NYSE:IT) with 5.86% of the portfolio

Gartner is another Baron’s brilliant long-term decision. He stacked up their stocks in 2013 when they were valued at $50. Their value varied in the last three years between $290 and current $466. Baron currently owns 4.66 billion shares that are valued at $2.17 billion. He invested into this company stock a total of $244 million, netting him a gain of 788%.

  • Arch Capital Group (NASDAQ:ACGL) with 4.6% of the portfolio

This mortgage and insurance company is another great Barone’s find. He currently owns 21.2 million shares and the majority he paid at a discount price below $20. Their value in recent years is rising and it is not going under $40. Their current value is $80. Baron’s stake is valued at $1.71 billion, while he invested $353 million, netting a 383% gain.

  • CoStar Group Inc. (NASDAQ:CSGP) with 4.34% of the portfolio

Ron Baron owns 19.2 million CoStar shares, which takes 4.82% of all outstanding company stocks. Like his other holdings, he is holding it for the long run. Baron started trading it more than 10 years ago when stocks were valued at below $10. Since then they have had their ups and downs, but since 2020 the value hasn’t gone below $50. He invested in this holding a total of $271 million, while his stake is valued at $1.61 billion. This means that the total gains for his investors are 494%.

  • Factset Research Systems Inc. (NYSE:FDS) with 3.5% of the portfolio

From all these examples we can see Barone’s hunch for undervalued companies. Like Factset, almost all have been a part of his portfolio for longer than a decade. Baron started trading it while their value was below $100 and now their value is more than 4 times higher. Their current value is at $470. Baron owns 2.75 million shares that are valued at $1.3 billion, while he invested in them $289. Like other major holdings, this also brought significant returns, in this case of 348%.

Sector

Ron Baron not only aims for diversification among companies but also among sectors. The current sector distribution is:

  • Technology with 34.8% of the portfolio worth $12.9 billion
  • Finance with 20.8% of the portfolio worth $7.71 billion
  • Consumer Discretionary with 20.1% of the portfolio worth $7.43 billion
  • Healthcare with 11.4% of the portfolio worth $4.23 billion
  • Industrials with 4.6% of the portfolio worth $1.72 billion
  • Consumer Staples with 3.5% of the portfolio worth $1.31 billion
  • Real Estate with 1.6% of the portfolio worth $584 million
  • Materials with 0.3% of the portfolio worth $109 million
  • Utilities with 0.2% of the portfolio worth $61.3 million
  • Companies from uncategorized sectors with 2.8% of the portfolio worth $1.02 billion.

Investment Philosophy

Ray Baron is known as one of the most successful growth stock investors of all time. As a growth stock investor, he is looking for companies that he estimates will grow at an above-average rate in comparison to the growth of their industry sector, or the wider market.

The best way to invest, according to Baron, is to own the business. When he decides to invest in a company, he is not looking for a short or long-term horizon. At least not in the usual perceived way. He likes to keep the stocks longer than 10 or even 20 years. He believes that wealth is accumulated not through selling and buying shares, but through owning companies.

When searching for companies to invest in Baron is looking for leaders that show initiative and enthusiasm for their business. Leaders who have a vision for the growth of their business are the ones they enjoy working with.

Ron Baron also likes to learn as much as possible about the business itself. He likes to ponder about the products or services they offer and try to understand how they work, and what they can offer. He is often cited as a very curious person who enjoys broadening his knowledge, which is one of the factors that helps him in making good informed investment decisions.

Baron does not pay much attention to macro factors like interest rates, and forecasts for gross domestic products. He says that he cannot predict a recession, and he distrusts anyone who claims they can.

He spends a lot of time analyzing the fundamentals of the company, including the industry landscape, and crucial competition. He likes to keep all funds business transparent and he regularly sends quarterly reports to all his shareholders.

Ron Baron’s Approach

Long-term Investment Philosophy

When talking about an investment horizon Baron doesn’t look to invest if he doesn’t think the company has long-term potential. When making a bet he is looking for companies that can double their value throughout 5 to 6 years. Some of his holdings are active for two decades, but a holding stays in the portfolio for an average of 6 to 7 years.

Once he commits an investment he doesn’t pay attention to short-term price fluctuations. Baron has a high-convincing approach to investing, meaning that he has real faith in companies he commits to. He is staying for the long haul and is not too keen on making sudden emotional decisions.

Baron chooses to sell his holdings for three main reasons. The first one is when holdings become very successful so they become too large in percentage of the portfolio. The second is the return rate that they can deliver. Baron prefers companies with 15% annual returns. In case they slow down to 7% or 8% they are a candidate for selling. And the third cause can be a rare case of an investment mistake that is identified early on.

Take A Look At What’s Behind Ron Baron’s Investment Strategy:

Focus on High-Quality Businesses

Before Baron’s funds make an investment decision they often spend months investigating all the crucial elements of the company. They pay special attention to the company’s top management, to see what makes them tick, and if can they deliver good results in the long term.

When analyzing companies Baron is searching for the competitive edge. This is crucial if the company wants to sustain its growth momentum. Baron focuses on companies with unique technology or products, high brand loyalty, or high proficiency operations.

One of the key reasons for looking for quality companies is Baron’s demand for compound returns. They can significantly boost the investment over time, and with a long-term horizon, this is even more of a factor.

By investing in quality businesses he is also mitigating risk. These companies are less prone to short-term volatility or market swings.

Ron Baron’s Notable Investment Success

Throughout his long and fruitful investment career, Baron has had several investment success stories. Some of the best examples are:

  • Tesla (TSLA). Baron invested in Tesla early on, in 2004. He then saw Musk’s revolutionary potential. He showed reassurance about Tesla’s electric cars back in 2014 when he said that the majority of people will drive a Tesla in 25 years. Since his investment, the Tesla stock price skyrocketed by 10,000%.
  • Seagen (SGEN). A company aiming to revolutionize cancer treatment became Baron’s favorite back in 2011. He saw the initial potential of the company and invested before they even had a marketed product. His belief in their potential paid off, and they made significant progress in cancer therapies. Seagen stocks have risen over 3,000% since Baron bought them, showing his keen feeling for innovative businesses.
  • Chipotle Mexican Grill (CMG). Baron identified the Chipotle fast casual dining concept early on. Still a young company, back in 1999, he became an early investor. Their focus on quality ingredients, and innovative approach to dining, was a trigger for investment. When he decided to exit from the company the stock price rose by 8,000%.

How to Invest in Ron Baron Funds

Ron Baron and his team are managing several mutual funds from which you can choose. You should take into account your investment strategy, the goals and returns you expect, and risk tolerance. These 4 Ron Barone funds are top choices and you should be able to find a suitable investment vehicle among them:

  • Baron Asset (BARAX). This is a mid-cap growth fund managed by Andrew Peck. The largest holding in this fund is Gartner. This leading innovative and research company from the IT sector has been a part of the fund’s portfolio since 2007. The second largest holding is IDEXX laboratories, a giant in diagnostic and testing devices for animals. If you prefer investing in innovative sectors and companies, then Baron Asset could be a very good choice
  • Baron Opportunity (BIOPX). This growth fund invests in companies of all sizes. It is managed by Michael Lippert who prefers industries with long runways. Those include cloud computing, genomics, electric vehicles, and cybersecurity. The top three holdings in this fund are Microsoft, Google, and Amazon.
  • Baron Emerging Markets (BEXFX). A great example of a no-load fund that was founded in 2010. It is managed by Michael Kass who is focused on the Indian market. He believes that the recent tax reforms are good for the overall Indian economy. It brings higher levels of transparency and increases productivity and competitiveness. KassKass’s opinion is that investing in India will bring positive results and that we are just entering that cycle. Besides India, this fund is also focused on China, and companies from robotics, electrical vehicles, software, and biotechnology sectors.
  • Baron Wealthbuilder (BWBFX). An alternative approach to investing through this fund of funds allows the investor to allocate the investment along 16 different Barone funds. The fund started working in 2017 and is managed by Ron Baron and his son Michael Baron. Its performance was impressive with 13.5% of annual returns almost twice as much as the MSCI All-Country World Index.

You can open an account directly through the Baron Funds website, or use the service of an online broker. Some of the popular brokerage companies that are offering Baron funds are:

  • Charles Schwab
  • Fidelity Investments
  • TD Ameritrade
  • Vanguard.

Before you decide to invest you need to know that Baron funds are all structured to aim for long-term returns. If your goals and strategy are different, you may be better at finding other funds to invest in. Also, their fees are about 1.3% which is in no way low. In any case, if you are not sure how to invest your capital, first consult with a financial advisor.

FAQs

What Are Ron Baron’s Current Holdings?

Ron Baron currently owns shares in 323 companies, while the biggest holdings include:

  • Tesla Inc with 10% of the portfolio
  • Gartner Inc with 5.86% of the portfolio
  • Arch Capital Group with 4.6% of the portfolio
  • CoStar Group Inc. with 4.34% of the portfolio
  • Factset Research Systems Inc. with 3.5% of the portfolio.

What Does Ron Baron Own?

Ron Baron owns an investment management firm, Baron Capital. Through it, he owns and manages Baron Funds, several mutual funds with different strategies.

What Is the Best Baron Fund?

Choosing the best fund can be a challenging task due to several factors that can impact the overall opinion. What are your investment goals? How soon do you want to generate solid returns? What sectors do you prefer? How much capital do you want to invest? These are just some of the questions that can lead to the answer to the question.

But as an overall recommendation, our pick would be Baron Partners Fund (BPTRX). It is a highly diversified fund that invests in companies of all sizes. It offers a middle ground between growth potential and level of stability. In 2023 the fund performance was at 43.09% beating the S&P 500 which delivered 26.29%.

Final Thoughts

Ron Baron’s successful long-term stock growth strategy resulted in annualized returns of 20.15% since 1994 and his flagship Fund Baron Growth Fund commenced operations. His knack for identifying potentially high-growth companies has made him one of the most successful growth investors.

His current portfolio is mostly made from his long-term holdings like Tesla, Gartner, and CoStar Group. The fund is highly diversified among different sectors, and during 2023 Gartner and Arch Capital Group generated major returns. Ron Baron expressed his belief in Musk and Tesla and said that Tesla’s value could hit $3 trillion in the next 10 years.

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Jacob Wolinsky is the founder of HedgeFundAlpha (formerly ValueWalk Premium), a popular value investing and hedge fund focused intelligence service. Prior to founding the company, Jacob worked as an equity analyst focused on small caps. Jacob lives with his wife and five kids in Passaic NJ. - Email: jacob(at)hedgefundalpha.com FD: I do not purchase any equities to avoid conflict of interest and any insider information. I only purchase broad-based ETFs and mutual funds.