Ron Baron’s Investment Triumph in 2024: A Tesla-Fueled Surge
Ron Baron, the octogenarian billionaire and permabull money manager, experienced a remarkable 2024, largely driven by his prescient and substantial investments in Tesla and SpaceX. His flagship fund, the Baron Partners Fund, boasting $7.3 billion in assets, surged by an impressive 37% year-to-date, a feat primarily attributed to Tesla’s meteoric 75% share price appreciation. This fund’s hefty 40% allocation to Tesla, coupled with a further 17% stake in SpaceX, underscores Baron’s unwavering conviction in Elon Musk’s ventures. This concentrated approach, though carrying inherent risk, has historically rewarded Baron’s clientele, many of whom are retirees, with the Partners Fund delivering an average annualized return of nearly 15% since its inception in 1992. This consistent outperformance has placed the fund among the nation’s top performers, showcasing average annual returns exceeding 20% over various long-term periods.
In contrast, the Baron Growth Fund, a $7.7 billion fund focused on smaller growth-oriented U.S. companies, experienced a more modest 3% gain in 2024, largely due to its lack of exposure to Tesla or SpaceX. However, its long-term track record remains impressive, with an average annualized return exceeding 12% since its 1994 inception. The stark difference in performance between the two funds highlights the significant impact of Baron’s concentrated bets on Musk’s companies. While the Growth Fund adheres to a more diversified approach within the small-cap space, the Partners Fund’s outsized returns are directly tied to the explosive growth of Tesla and SpaceX, showcasing both the potential rewards and inherent risks of such a strategy.
Baron’s Tesla investment, initiated between 2014 and 2016 at an average price between $10 and $12 per share, has been the cornerstone of his recent success. His initial $400 million investment has ballooned in value, mirroring Tesla’s remarkable ascent to a trillion-dollar market capitalization. Baron’s confidence in Musk extends beyond Tesla, with his prediction that Musk will become the world’s first multi-trillionaire. This faith is fueled by Tesla’s anticipated growth, projected to reach a $5 trillion valuation within the next decade, with the potential for even greater heights should Musk’s ventures in robotics and autonomous driving prove successful. Although Tesla’s share price experienced some volatility in prior years, leading to minor fund outflows, Baron remains steadfast in his bullish outlook, maintaining a significant allocation to the electric vehicle giant.
Baron’s personal fortune has mirrored the success of his investments, surging to an estimated $6.5 billion, reflecting his firm’s growth to $48 billion in assets under management across 19 funds. From humble beginnings in 1982 with just $10 million under management, Baron has cultivated a reputation as a shrewd buy-and-hold investor. Despite his advanced age, he remains actively engaged in the firm’s operations, harboring ambitious plans to reach $200 billion in assets within the next decade, with a further doubling of that figure in the subsequent ten years, a legacy he envisions being carried forward by his sons and executive team. This long-term vision underlines Baron’s unwavering commitment to his investment philosophy and the continued growth of his firm.
Beyond Tesla, Baron’s enthusiasm extends to SpaceX, Musk’s privately-held space exploration company. With SpaceX’s valuation soaring to $350 billion following a recent secondary share sale, Baron’s stake has appreciated significantly. He envisions further substantial growth, projecting a $400 billion valuation by 2027 and $600 billion by 2030, driven by the company’s reusable rocket technology and the expanding reach of its Starlink satellite internet service. Baron views SpaceX as the architect of a new space-based infrastructure, likening it to the development of railroads, with Starlink poised to become a ubiquitous global communications network.
Baron also expressed optimism regarding Musk’s potential contributions to government efficiency, particularly in streamlining regulations. Drawing parallels between SpaceX’s cost-effective and agile approach and the potential for similar improvements in government operations, Baron believes Musk’s involvement could positively impact markets and address the burgeoning U.S. deficit. This perspective highlights Baron’s belief in Musk’s ability to translate his business acumen to the public sector, potentially driving significant improvements in efficiency and cost savings.
Beyond Tesla and SpaceX, Baron’s portfolio includes significant holdings in established companies like Arch Capital Group, Gartner, and CoStar Group, alongside long-term favorites such as MSCI and Vail Resorts. While some of these holdings have lagged the broader market in the short term, Baron emphasizes their long-term potential, highlighting their durable business models, competitive advantages, and growth prospects. His investment philosophy emphasizes low turnover, aiming to double returns roughly every five years. He adheres to a disciplined approach, divesting from companies only when their growth falters or fundamentals change, demonstrating a commitment to long-term value creation. Furthermore, despite his long-held skepticism towards passive investing, Baron’s firm is now exploring active ETFs, acknowledging the potential tax benefits and driven in part by the urging of his sons, who are increasingly involved in the firm’s management. Inspired by Musk’s ambitious vision, Baron aims to grow his firm to a trillion-dollar behemoth, reflecting his unwavering belief in the power of long-term, growth-focused investing.
