Imagine you are an institutional broker in the 1970s, buying small cap companies such as McDonald’s, Disney, Federal Express, Nike, Mattel, Hyatt –at $1 billion, $2 billion to $3 billion, they were considered small cap. You would recommend these firms to clients, buy them for yourself, then flip them after they doubled and tripled.
The problem with that strategy, according to legendary fund manager Ron Baron of Baron Funds, was that he then suffered to watch them rise 30X. The impact of this on Baron was to turn him into a super long-term holder of equities. He owns Charles Schwab since 1992, Choice Hotels since 1996, Veil Resorts since 1997. His current turnover ratio ranges from 3-7% depending on which Baron funds you are studying. His mutual fund peers have turnover ratios that are often 50%, 100% even 200% per year.
The firm he founded in 1982 is known for long-term, fundamental, active approach to growth investing. Today, they have $49.1 billion in AUM, and 16 of 17 Baron Funds (about 98.3% of assets) outperformed their passive benchmark since inception. The Baron Partners Fund was up +148% in 2020.
Baron has been an investor in Tesla since 2014 — both in his funds and (with permission of his Board) personally. The firm also owns about 1% of Space X.
A transcript of our conversation is available here.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Kevin Landis, Firsthand Funds. The firm’s Firsthand Technology Opportunities Fund (TEFQX) was created in 1999, and has gained 21.1% annually over the past 10 years vs 13.9% for the S&P500 and 18.5% for the Nasdaq Index. It gained 102% over the past 12 months.
