Ron Baron, the founder of Baron Capital, sought advice from casino magnate Steve Wynn when he was starting his investment business. Wynn advised him to name the company after himself, signifying a commitment to stand behind his investments. Fast forward four decades, and Baron Capital has made a momentous investment in Elon Musk's empire, which includes Tesla and SpaceX.
Baron invested $570 million in Tesla between 2014 and 2016, amounting to approximately 2% of his assets under management at that time. Today, Tesla constitutes around 10.9% of Baron Capital's $41 billion under management. This strategic investment has propelled Baron's main mutual fund to become the sole mutual fund that outperforms the Nasdaq over the last 5, 10, and 15 years, with an impressive annualized return of 17%.
Baron's investment philosophy epitomizes a bullish buy-and-hold strategy, which has proven effective in an environment where a handful of big tech stocks, such as Apple, Microsoft, and Alphabet, have driven significant market gains. With a concentrated portfolio and ownership of Tesla, one of the best-performing big tech companies, Baron has benefitted from Tesla's remarkable stock market ascent, earning him a place on The MarketWatch 50 list of influential market figures.
Elon Musk's recent skepticism about Tesla's cybertruck and concerns regarding consumers' ability to afford his high-end cars in the face of rising interest rates might have raised doubts. However, Baron remains optimistic, asserting that Tesla's stock will continue to rise over time, and its market capitalization could grow from its current $630 billion to as much as $4 trillion in the next decade.
According to Baron, Tesla is more than just a car company; it's a pioneer in autonomous driving and battery technology. Baron envisions a future where Tesla's innovations are integrated into all vehicles, making it an indispensable player in the automotive industry.
Even more exciting for Baron is SpaceX, the world's busiest rocket-launching company and its satellite-Internet subsidiary. Although SpaceX remains a private company, Baron anticipates it will go public and list on a stock exchange within the next three years. His investment of about $700 million in SpaceX has already seen substantial returns, with a recent secondary share sale implying a valuation of nearly $150 billion for the entire company.
Baron predicts that by 2030, SpaceX could be worth approximately $500 to $600 billion, with the potential to yield tenfold returns in the 2030s. He believes that SpaceX could surpass Tesla in size and influence by that time.
SpaceX's satellite-Internet business, described by Baron as "Internet for the planet," is poised to offer low-cost, high-quality Internet services worldwide. The innovation that sets SpaceX apart is its ability to launch and reuse rockets, significantly reducing the cost of space travel.
Despite his bullish outlook, Baron acknowledges the risk of betting heavily on one individual, Elon Musk. However, he believes that the risk was more substantial when both Tesla and SpaceX were smaller companies with fewer resources and talent. Baron is confident in the wealth of talent Musk has attracted to his companies, emphasizing that over 3.5 million people applied for jobs at Tesla and SpaceX in a single year.
In conclusion, Baron's investment success with Tesla and SpaceX underscores the effectiveness of his long-term, concentrated investment approach. His unwavering faith in these companies and their visionary leader, Elon Musk, has translated into remarkable financial gains. As Baron looks ahead to the future, he sees the potential for these investments to continue thriving and contributing to his impressive track record in the years to come.
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