In 2016, Ron Baron predicted Tesla Inc. would become one of the most valuable companies in the world. His firm, Baron Capital Management, was among the electric automaker’s largest investors at the time, with a 1% stake in the company.
The bet has resulted in a $4 billion profit, but Baron thinks it’s just the start, and sees the possibility of tripling that over the next 10 years. He also predicts similar success for SpaceX, another Elon Musk-led company. The same qualities that made Tesla successful—willingness to try new things in an industry wedded to old ideas and a focus on driving costs down—will help the rocket maker revolutionize a potential $1 trillion satellite broadband market, he said.
“They’re innovating at the speed of light,” Baron, 78, said in an episode of “Bloomberg Wealth with David Rubenstein.” “And they’re doing that with the cars. And they’re doing that with space.”
Baron Capital’s success as an old-line mutual fund firm is an anomaly at a time when stock pickers are being increasingly displaced by index funds and ETFs. He started the company in 1982 with $100,000 and now has $56.7 billion in assets under management, split equally between individual and institutional investors. He and his family own about 5% of the firm’s assets, which are almost entirely invested in publicly traded stocks.
His Baron Partners Fund has outperformed 99% of retail peers over the past three years, according to data compiled by Bloomberg, while the Baron WealthBuilder Fund has done better than 90% of competitors over that time period.
Still, if it were up to his parents, he’d never have become an investor. They wanted him to go to medical school, but a summer job working the overnight shift at a hospital near his hometown of Asbury Park, New Jersey, convinced him that a white coat wasn’t in his future.
“I hated it,” he said.
After majoring in chemistry at Bucknell University, Baron got a fellowship to Georgetown University—“I didn’t want to go to Vietnam”—and sold Fuller brushes to make extra money. He later attended George Washington University Law School at night while working as an examiner for the U.S. Patent Office during the day.
His first financial job was at Janney Montgomery Scott, where he was fired after only a year when a negative report he wrote about a company got published in the Wall Street Transcript. Baron soon got an offer to be an analyst, and then joined with a buddy from law school to sell research to institutional investors before starting his own firm.
Baron said he isn’t worried about a financial downturn and views stocks as a good hedge against inflation. Instead of timing trades, he said he believes that a long-term holding strategy leads to the strongest results over time.