Ron Baron (Trades, Portfolio), leader of Baron Capital Management, appeared on CNBC’s “Squawk Box” on Friday to discuss the U.S. economy, his market outlook and more.
When asked about his view on the market’s future performance, the investor, who manages the Baron Asset Fund, the Baron Growth Fund and Baron Partners Fund, said that his firm does not worry about “the stock market…interest rates, the economy, what the government is going to do, wars. In my whole history, there has never been a good news year, with one exception when they took down the wall between East and West Germany.”
Yet, despite all of this, the stock market his risen 34 times since 1970 when his career began.
“What I think is growth is now beginning to accelerate, and over the next 50 years, compared to the last 50 years, I think that you are going to have faster growth than 7%,” he said. “Assuming you get the same 7%, that means you are going to have 35 times your money over the next 50 years, which means that the Dow Jones, which is now 34,000, will be 900,000.”
Watch the full clip from the interview below.
Based on his optimistic outlook, investors may be curious to know what stocks Baron likes currently.
The guru’s New York-based firm implements a bottom-up research process to find small and mid-size growth companies with open-ended opportunities and significant competitive advantages to invest in for the long term while they are trading at attractive prices.
According to the 13F filing for the three months ended March 31, Baron’s five largest holdings are Tesla Inc. (TSLA, Financial), Gartner Inc. (IT, Financial), Arch Capital Group Ltd. (ACGL, Financial), CoStar Group Inc. (CSGP, Financial) and MSCI Inc. (MSCI, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Tesla
The investor boosted his Tesla (TSLA, Financial) stake by 0.45% during the first quarter, bringing the total to 17.61 million shares. It accounts for 10.97% of the equity portfolio and is the largest position. GuruFocus estimates Baron has gained 1,278.65% on the long-held investment.
The Austin, Texas-based electric vehicle manufacturer has a $794.40 billion market cap; its shares were trading around $255.62 on Friday with a price-earnings ratio of 75.18, a price-book ratio of 16.86 and a price-sales ratio of 10.28.
The GF Value Line suggests the stock is significantly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 85 out of 100, the GF Score indicates the company has good outperformance potential. While it received high ratings for growth, financial strength, value and momentum, the profitability rank is more moderate.
Of the gurus invested in Tesla, Baillie Gifford (Trades, Portfolio) has the largest stake with 0.82% of its outstanding shares. PRIMECAP Management (Trades, Portfolio), Catherine Wood (Trades, Portfolio), Philippe Laffont (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies also have notable positions in the stock.
Gartner
The guru curbed the Gartner (IT, Financial) stake by 2.09% during the quarter to 4.79 million shares. The position occupies 4.69% of the equity portfolio and is the second-largest holding. GuruFocus data shows the firm has gained approximately 1,113.63% on the investment over its lifetime.
The tech company headquartered in Stamford, Connecticut, which provides research and analysis on information technology and other related industries, has a market cap of $27.03 billion; its shares were trading around $341.93 on Friday with a price-earnings ratio of 29.50, a price-book ratio of 57.47 and a price-sales ratio of 4.89.
According to the GF Value Line, the stock is fairly valued currently.
Supported by high ratings for profitability, momentum and growth, the GF Score of 88 means the company has good outperformance potential. The financial strength rank, however, is more moderate while value is low.
With a 6.07% stake, Baron is the company’s largest guru shareholder. Gartner is also being held by Al Gore (Trades, Portfolio)’s Generation Investment, Wallace Weitz (Trades, Portfolio), Simons’ firm, Steven Cohen (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Tom Gayner (Trades, Portfolio) and Caxton Associates (Trades, Portfolio).
Arch Capital
Baron trimmed the Arch Capital (ACGL, Financial) position by 0.59% during the quarter, bringing the total to 21.29 million shares. As the third-largest holding, the stock represents 4.34% of the equity portfolio. GuruFocus found the guru has gained around 502.41% on the investment so far.
The American insurance company based in Bermuda has a $26.69 billion market cap; its shares were trading around $72.50 on Friday with a price-earnings ratio of 13.97, a price-book ratio of 2.05 and a price-sales ratio of 2.53.
Based on the GF Value Line, the stock appears to be modestly overvalued currently.
The GF Score of 82 implies the company has good outperformance potential, driven by high profitability and growth ratings, middling marks for financial strength and low value and momentum ranks.
Baron has the largest stake in Arch Capital with 5.72% of its outstanding shares. Other guru investors include Louis Moore Bacon (Trades, Portfolio), Greenblatt, Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Paul Tudor Jones (Trades, Portfolio) and Caxton Associates (Trades, Portfolio).
CoStar Group
The guru cut his stake in CoStar Group (CSGP, Financial) by 0.73% during the quarter to 18.97 million shares. The position makes up 3.92% of the equity portfolio as the fourth-largest holding. GuruFocus says Baron has gained approximately 628.80% on the investment to date.
Headquartered in Washington D.C., the commercial real estate company has a market cap of $36.14 billion; its shares were trading around $87.27 on Friday with a price-earnings ratio of 95.90, a price-book ratio of 5.10 and a price-sales ratio of 15.54.
The GF Value Line suggests the stock is fairly valued currently.
The GF Score of 96 indicates the company has high outperformance potential on the back of high ratings for four of the criteria and a more moderate value rank.
Holding a 4.64% stake, Baron is the company’s largest guru shareholder. Baillie Gifford (Trades, Portfolio), Frank Sands (Trades, Portfolio) and Chuck Akre (Trades, Portfolio), Simons’ firm and Weitz also have large holdings.
MSCI
The investor decreased the MSCI (MSCI, Financial) holding by 0.06% during the quarter to a total of 2.17 million shares. It has a weight of 3.65% in the equity portfolio as the fifth-largest position. GuruFocus research shows Baron has gained approximately 133.98% on the investment thus far.
The New York-based finance company, which provides equity, fixed income, real estate indexes, portfolio analysis tools and ESG and climate products, has a $37.56 billion market cap; its shares were trading around $469.14 on Friday with a price-earnings ratio of 43 and a price-sales ratio of 16.59.
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Score of 96 implies the company has high outperformance potential. Although it solid ratings for four of the criteria, the financial strength rank is more moderate.
The largest guru shareholder of MSCI is Baron with a 2.71% stake. The stock is also being held by Fisher, Gayner, Cohen, Mario Gabelli (Trades, Portfolio), Jefferies Group (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Greenblatt and Caxton Associates (Trades, Portfolio).
Additional holdings
Rounding out Baron’s top 10 holdings are IDEXX Laboratories Inc. (IDXX, Financial), FactSet Research Systems Inc. (FDS, Financial), Vail Resorts Inc. (MTN, Financial), Iridium Communications Inc. (IRDM, Financial) and Ansys Inc. (ANSS, Financial).
