Ron Baron is the founder of investment firm Baron Capital and an enormously successful growth investor. Under Baron’s leadership, his firm’s flagship fund delivered a blistering 18% annualized return from 2003 to 2022.
Baron’s stock picks can be very instructive for today’s growth investors, especially since some of his best picks are still in their growth phase. So, we’ll take a closer look at Ron Baron’s six best all-time stock picks and why he chose them.
Who is Ron Baron?
Ron Baron is a Wall Street growth guru with more than 50 years’ worth of investing experience. He started his career in 1970 and spent a decade working at several brokerage firms as an analyst. In 1982, he launched the investment firm Baron Capital.
Baron Capital launched its first public mutual fund, the Baron Partners Fund, in 2003. Today, the firm has $57 billion in assets under management. Ron Baron calculated that the firm has earned $52 billion in realized and unrealized gains since 1992.
Baron continues to run Baron Capital as its chairman, CEO, and portfolio manager for the firm’s largest funds.
Ron Baron Investment Style
Ron Baron has used a long-term growth investment approach throughout his career. He looks for companies that have a lasting competitive advantage and defensible niches. He has also said on numerous occasions that a company’s management team is one of the key factors he considers when deciding what companies to buy.
Baron’s specialty is in finding small and mid-cap companies before they grow huge, and he frequently invests in private early-stage funding rounds. In most cases, Baron invests for a minimum of five years and often 10 or more.
Ron Baron Stock Picks
Ron Baron has spent nearly his entire career picking stocks and he’s made a fortune by being one of the best in the world at it. Let’s take a closer look at six of Baron’s best picks over the past 20 years.
Tesla is arguably Ron Baron’s best all-time stock pick. It’s certainly the pick that received the most notice. That’s because he invested so heavily in Tesla that at one point in 2020, Tesla shares made up 49% of his firm’s flagship Baron Partners Fund. In fact, the fund was so heavily allocated to Tesla stock that Morningstar downgraded it for being overly risky.
Baron’s bet on Tesla paid off handsomely. From when he first invested in the electric carmaker in 2014 to the stock’s peak in 2021, Tesla shares gained roughly 2,700%. Before the Baron Partners Fund invested in Tesla, it had an annualized return of 14.78%. After Tesla entered the portfolio, the fund’s performance jumped to 21.97%.
Baron Capital continues to hold around 17 million shares of Tesla stock worth more than $2.1 billion. Ron Baron has said he believes Tesla shares will be worth $1,500 by 2030, up from around $200 today.
Arch Capital Group
Arch Capital Group has been in the Baron Partners Fund since the fund went public in 2003. Over that time, the stock has gained roughly 1,900% and delivered an annualized gain of 13.5% for the fund. Baron Capital holds roughly $1.3 billion in Arch Capital Group shares across its funds.
Although Baron has been invested in Arch Capital Group for 20 years, he rarely speaks about this specialty insurance company. He’s said over the years that he likes the company’s management team and believes its underwriting business will continue to grow in size and profitability.
Brokerage firm Charles Schwab has also been a major constituent in the Baron Partners Fund since inception. The stock has experienced more ups and downs than some of Baron’s other holdings – particularly during the 2008 financial crisis – but it has nonetheless delivered annualized gains of 12.95% for 20 years. Today, Baron Capital holds $559 million worth of shares.
Baron only periodically comments on his Schwab investment, noting that the company has remained extremely strong even as brokerages have evolved over the past decade. In 2022, Baron pointed out that Schwab gained $400 billion in new client assets even as the markets struggled overall.
Baron started investing in Hyatt Hotels when the company went public in 2009. He has a long history of investing in travel and real estate companies, including companies like Las Vegas Sands, Vornado Realty, Vail Resorts, and others.
Since 2009, Hyatt has delivered a 304% return. Baron recently pointed to the company’s transformation towards franchising and the rebound in leisure travel post-COVID as reasons to be optimistic about further growth.
Baron first started investing in Vail Resorts in 2006 and added shares to the Baron Partners Fund in 2008. Today, it’s one of the fund’s largest holdings and Baron Capital holds a $1.1 billion position overall in Vail.
Since 2006, Vail has returned nearly 650%. Baron has been enthusiastic about the company’s shift to recurring season pass sales, which make it something like a subscription business for skiing.
Given Baron’s focus on management and strong endorsement of Tesla founder and CEO Elon Musk, it should come as little surprise that Baron has also been involved in Musk’s SpaceX. SpaceX is still private, but Baron Capital has invested nearly $500 million in the company’s early funding rounds.
That includes $100 million at a $125 billion valuation in 2022. In early 2023, SpaceX held its latest funding round at a $137 billion valuation – a quick 10% gain for Baron.
Ron Baron Lifetime Performance
By almost any measure, Ron Baron’s performance is exceptional. He estimates that from 1992 to 2022, Baron Capital earned $52 billion in realized and unrealized gains. The firm also went from $100 million in assets under management in 1992 to $57 billion today.
The firm’s flagship fund, the Baron Partners Fund, has an average annualized return of 17.93% from its inception in 2003 to the end of 2022. For comparison, the S&P 500 returned 10.30% annually and the Russell 1000 Growth index returned 11.60%. Notably, Tesla shares still make up nearly half the fund’s portfolio. So, the fund’s future performance is closely tied to Baron’s predictions about Tesla’s continued dominance in the electric vehicle market.
Ron Baron himself has an estimated net worth of $5 billion.
Conclusion: Ron Baron Stock Picks
Ron Baron is one of the most successful long-term growth investors in the world. He has an incredible talent for finding companies that are poised to dominate their industries and he isn’t afraid to bet big on winners. Many of Baron’s best all-time picks are still attractive growth stocks, so investors can learn a lot by keeping an eye on what’s in Baron’s portfolio.