- Daily Zen
Ron Baron, 76, the investor and founder of Baron Capital, 76 believes in finding the right company to invest in with a lot of due diligence and hanging on to it for a long time and reaping the benefits. Baron also co-manages Baron Growth (BGRFX), Baron Focused Growth (BFGFX), and Baron Partners (BPTRX).
Baron was an early investor in Tesla and SpaceX both and is of the opinion that Tesla will be among the largest and most valuable companies of the world in a decade. He predicts that by 2030, Tesla would be worth $1.5 trillion with a revenue of $750 billion to $1 trillion, and an operating profit of $150 billion to $200 billion.
In an interview with a financial magazine Barron, he said that Tesla beat the market in the last year in almost all its assets.
Talking of his process of picking up shares and investment strategies, he said that he was in it for the long term, and short-term play did not interest him. He said that the coronavirus effect does not worry him nor do the elections, “I have never seen a president so fascinated with envisioning the stock market as the most important element for his re-election,” he added as an aside on the upcoming elections and Donald Trump.
Elaborating on the modus operandi of his investment companies, he said that the group does in-depth research of the businesses, not the stocks. They look at the company performance, its competition, product value and talent at the helm of the company.
“We have 36 investment professionals and 170 employees, and we’ve never had a layoff. We invest in the people in our business. That’s a tremendous advantage,” he added.
He believes Tesla was a gold mine of an investment idea. He purchased all his shares of the company between 2014-2016. They were 1.62 million shares at an average price of $219.14 and a total cost of $355 million. Tech stock value has tripled now (it closed at $917 and about), and the annual revenue of $2.3 billion in 2013 has become $25 billion in 2019. Baron said despite some upsets by Elon Musk himself, his faith in the company “was never shaken.” If possible, he was ready to buy more stake in the company.
Tesla is racing ahead of the competition in the EV market. An advantage Tesla has is that it has cut out the dealers and made the car capital-light. Suppliers like it so much they give them extra terms, he said. The electric vehicles have lesser parts to service, it is all about the batteries. With cloud communication, the servicing part is taken care of.
The billionaire also says that Tesla, which sold 367,000 vehicles last year, could be selling 2 million EVs per year in two years, and ultimately—at least 10 million cars a year.
Baron is not only about disruptive businesses like Tesla and Zillow. He believes that the portfolio should be balanced. “You might make a lot of money, but you would have no clients. Maybe 30% to 40% of the portfolio is these rapidly growing businesses, offset by more stable businesses like real estate, financial, and core growth companies.”