Ron Baron’s 2024: A Year of Tesla-Fueled Triumph
Veteran investor Ron Baron, known for his unwavering optimism and concentrated bets, experienced a remarkable 2024, largely thanks to the resurgence of Tesla. His flagship Baron Partners Fund, with a hefty 40% allocation to Tesla and another 17% to SpaceX, surged 37% year-to-date, mirroring Tesla’s impressive 75% share price gain. This performance is consistent with the fund’s historical track record, boasting an average annualized return of nearly 15% since its inception in 1992. Baron’s clients, many of whom are retirees comfortable with concentrated risk, have become accustomed to his bold investment strategies paying off handsomely. The Partners Fund has consistently outperformed the market, achieving average annual returns of 31%, 22%, and 21% over the last five, ten, and fifteen years, respectively, solidifying its position among the top-performing mutual funds in the nation.
In contrast, Baron’s other major fund, the $7.7 billion Baron Growth Fund, focusing on smaller growth companies, experienced a more modest 3% gain in 2024. This disparity stems from the Growth Fund’s lack of exposure to Tesla and SpaceX, highlighting the significant impact these two companies have had on Baron’s overall performance this year. While the Growth Fund lagged in comparison to the Partners Fund, its long-term performance remains impressive, with an average annualized return exceeding 12% since its inception in 1994. This underscores Baron’s consistent ability to identify and invest in promising growth opportunities, albeit with varying levels of concentration depending on the specific fund strategy.
Baron’s prescient investment in Tesla, initiated between 2014 and 2016 at an average price between $10 and $12 per share, has become the cornerstone of his success. His initial $400 million investment has multiplied exponentially, contributing significantly to both his personal fortune and his funds’ performance. Baron’s unwavering faith in Elon Musk, whom he predicts will become the world’s first trillionaire and multi-trillionaire, has been vindicated by Tesla’s meteoric rise. He envisions Tesla achieving a market capitalization of $5 trillion within the next decade, potentially even surpassing that figure if Musk’s ventures in robotics and autonomous driving prove successful. This bullish outlook reflects Baron’s conviction in the transformative potential of Tesla’s technology and Musk’s visionary leadership.
Despite some investor outflows during Tesla’s less stellar performance in previous years, Baron remains steadfast in his conviction, viewing the current situation as an opportunity for further growth. Although he trimmed his Tesla position in 2021 from 45% to 40% in the Baron Partners Fund, this was primarily a rebalancing measure rather than a reflection of diminished confidence. He currently has no intention of further reducing his Tesla holdings, underscoring his long-term perspective and belief in the company’s future prospects. Baron’s own net worth, estimated at $6.5 billion, has seen a significant boost this year, rising from $5.1 billion, a testament to his successful investment strategy. Since founding Baron Capital in 1982 with a modest $10 million under management, he has cultivated a reputation as a shrewd and patient investor, now overseeing $48 billion across 19 funds.
While Tesla has undoubtedly been a major driver of Baron’s success, SpaceX, Musk’s privately-owned space exploration company, holds an even greater allure for the veteran investor. SpaceX’s recent valuation surge to $350 billion following a secondary share sale further validates Baron’s long-held enthusiasm for the company. He projects SpaceX will reach a $400 billion valuation by 2027 and $600 billion by 2030, fuelled by its innovative reusable rocket technology and the expanding reach of its Starlink satellite internet service. Baron likens SpaceX to the "railroad to space," highlighting its disruptive potential and competitive advantage. He believes Starlink, now being adopted by major airlines, will become a ubiquitous service, further driving SpaceX’s growth.
Baron’s optimism extends to Musk’s new role within the Trump administration, where he’s been tapped to lead the newly formed Department of Government Efficiency (DOGE). Baron believes Musk’s expertise in streamlining operations and cutting costs at SpaceX can be effectively applied to government, potentially addressing issues such as burdensome regulations and the growing U.S. deficit. He sees Musk as a valuable asset to the administration, bringing a private sector efficiency mindset to the public sphere. This perspective underscores Baron’s faith in Musk’s ability to drive positive change, not just in the business world but also in government.
Beyond Tesla and SpaceX, Baron’s portfolio includes substantial holdings in Arch Capital Group, Gartner, and CoStar Group, reflecting his diversified investment approach. He favors companies with durable business models, unique competitive advantages, and strong growth prospects, exemplified by his long-term investments in MSCI and Vail Resorts. Despite their underperformance relative to the S&P 500 this year, Baron remains confident in their long-term potential. He highlights Vail Resorts’ rising demand and its innovative pre-season pass sales model as key strengths, while MSCI’s global exposure and its positioning within the growing passive investment trend are seen as significant advantages. Baron’s investment philosophy emphasizes long-term growth and resilience, prioritizing companies that can withstand market fluctuations and deliver consistent returns over time. Even as he adapts to the evolving investment landscape, considering active ETFs despite his historical preference for mutual funds, his core principles of identifying and holding onto high-quality businesses remain unchanged. Baron’s ambition, even at 81, remains undimmed, aiming to grow his firm’s assets under management to $200 billion within the next decade, and then to double that figure in the following decade, a testament to his enduring passion for investing and his belief in the power of long-term compounding. This drive to expand his firm’s reach reflects not only his personal ambition but also his desire to create a lasting legacy, likely inspired by the entrepreneurial spirit and relentless pursuit of growth embodied by Elon Musk. His willingness to embrace new investment vehicles like ETFs, despite his initial reservations, further demonstrates his adaptability and forward-thinking approach, ensuring that Baron Capital remains at the forefront of the investment industry.
