Ron Baron is the founder of investment firm Baron Capital and an exceptionally successful growth investor. Under Baron’s leadership, his firm’s flagship fund generated an impressive 18% annualized return from 2003 to 2022.
Baron’s stock selections offer valuable insights for today’s growth investors, particularly since several of his strongest picks remain in their expansion phase. Here’s a closer look at Ron Baron’s six best all-time stock picks and the rationale behind each choice.
Who is Ron Baron?
Ron Baron is a Wall Street growth guru with over 50 years of investing expertise. He began his career in 1970 and spent a decade working at various brokerage firms as an analyst. In 1982, he founded the investment firm Baron Capital.
Baron Capital launched its first public mutual fund, the Baron Partners Fund, in 2003. The firm now manages $57 billion in assets under management. Baron calculated that the firm has generated $52 billion in realized and unrealized gains since 1992.
Baron remains at the helm of Baron Capital as its chairman, CEO, and portfolio manager for the firm’s largest funds.
Ron Baron Investment Style
Ron Baron has employed a long-term growth investment approach throughout his career. He targets companies with lasting competitive advantages and defensible niches. He has repeatedly emphasized that a company’s management team ranks among the key factors he considers when selecting investments.
Baron’s specialty lies in identifying small and mid-cap companies before they scale dramatically, and he frequently participates in private early-stage funding rounds. Typically, Baron invests for a minimum of five years and often 10 or more.
Ron Baron Stock Picks
Ron Baron has dedicated nearly his entire career to stock selection and has built a fortune by excelling in this discipline. Let’s examine six of Baron’s most successful picks over the past two decades.
Tesla
Tesla stands as arguably Ron Baron’s greatest all-time stock pick. It’s certainly the selection that attracted the most attention. Baron invested so heavily in Tesla that at one point in 2020, Tesla shares comprised 49% of his firm’s flagship Baron Partners Fund. The fund’s Tesla allocation became so concentrated that Morningstar downgraded it for excessive risk.
Baron’s Tesla wager proved extraordinarily profitable. From his initial investment in the electric carmaker in 2014 to the stock’s peak in 2021, Tesla shares soared roughly 2,700%. Before adding Tesla to the Baron Partners Fund, the fund posted an annualized return of 14.78%. After Tesla joined the portfolio, the fund’s performance surged to 21.97%.
Baron Capital maintains around 17 million shares of Tesla stock valued at over $2.1 billion. Ron Baron projects Tesla shares will reach $1,500 by 2030, up from approximately $200 today.
Arch Capital Group
Arch Capital Group has remained in the Baron Partners Fund since its public launch in 2003. During this period, the stock has surged roughly 1,900% and delivered annualized gains of 13.5% for the fund. Baron Capital holds approximately $1.3 billion in Arch Capital Group shares across its funds.
Despite his 20-year investment in Arch Capital Group, Baron rarely discusses this specialty insurance company. He has noted over the years that he admires the company’s management team and believes its underwriting business will continue expanding in size and profitability.
Charles Schwab
Brokerage firm Charles Schwab has also served as a major holding in the Baron Partners Fund since inception. The stock has weathered more volatility than some of Baron’s other positions – particularly during the 2008 financial crisis – but has nonetheless delivered annualized gains of 12.95% over 20 years. Baron Capital currently holds $559 million worth of shares.
Baron occasionally comments on his Schwab investment, observing that the company has remained exceptionally resilient as brokerages have transformed over the past decade. In 2022, Baron highlighted that Schwab attracted $400 billion in new client assets despite overall market struggles.
Hyatt Hotels
Baron began investing in Hyatt Hotels when the company went public in 2009. He has an extensive history of investing in travel and real estate companies, including Las Vegas Sands, Vornado Realty, Vail Resorts, and others.
Since 2009, Hyatt has generated a 304% return. Baron recently cited the company’s transformation toward franchising and the recovery in leisure travel post-COVID as catalysts for continued growth.
Vail Resorts
Baron first invested in Vail Resorts in 2006 and added shares to the Baron Partners Fund in 2008. It now ranks among the fund’s largest holdings, with Baron Capital maintaining a $1.1 billion position overall in Vail.
Since 2006, Vail has returned nearly 650%. Baron has praised the company’s pivot to recurring season pass sales, which transforms it into essentially a subscription business for skiing.
SpaceX
Given Baron’s emphasis on management quality and strong endorsement of Tesla founder and CEO Elon Musk, his involvement in Musk’s SpaceX comes as no surprise. While SpaceX remains private, Baron Capital has invested nearly $500 million in the company’s early funding rounds.
This includes $100 million at a $125 billion valuation in 2022. In early 2023, SpaceX conducted its latest funding round at a $137 billion valuation – delivering a swift 10% gain for Baron.
Ron Baron Lifetime Performance
By virtually any metric, Ron Baron’s performance is outstanding. He estimates that from 1992 to 2022, Baron Capital generated $52 billion in realized and unrealized gains. The firm also expanded from $100 million in assets under management in 1992 to $57 billion today.
The firm’s flagship fund, the Baron Partners Fund, has achieved an average annualized return of 17.93% from its inception in 2003 through 2022. For comparison, the S&P 500 returned 10.30% annually and the Russell 1000 Growth index returned 11.60%. Notably, Tesla shares still comprise nearly half the fund’s portfolio, meaning the fund’s future performance remains closely tied to Baron’s predictions about Tesla’s continued electric vehicle market dominance.
Ron Baron himself has an estimated net worth of $5 billion.
Conclusion: Ron Baron Stock Picks
Ron Baron ranks among the world’s most successful long-term growth investors. He possesses exceptional talent for identifying companies positioned to dominate their industries and demonstrates the conviction to make substantial bets on winners. Many of Baron’s best all-time picks remain compelling growth stocks, so investors can gain valuable insights by monitoring Baron’s portfolio holdings.
