Ron Baron has a rare long-term record of beating the market. Here's how he did it

Published Wed, Jul 26 20233:00 PM EDT

Billionaire investor Ron Baron is one rare active manager that has been outperforming the market since the 1980s, thanks to his eye for long-term growth. The 80-year-old investor founded Baron Capital in 1982, and 16 of his 19 mutual funds representing 98.8% of the firm's asset under management have beaten their benchmark since their inception dates. One of his oldest and biggest funds, Baron Partners Fund (BPTIX) with $6 billion assets under management, has been the number one performing U.S. equity fund, as of the end of March, since its conversion to a mutual fund in 2003, according to Morningstar. The fund is up about 47% this year after racking up a 21% annualized return over the past 10 years. "Investing for the long term in competitively advantaged growth businesses managed by exceptional executives. That's our strategy," Baron said in a recent investor letter . "We judge competitive advantage and the character, integrity, intellect, and awesomeness, of executives, all of whom we like and admire or we wouldn't choose to invest with them." Baron said his investment philosophy is similar to Warren Buffett's, except that he is "growthier." Similarly, Baron Capital considers stocks as representing part ownership of publicly traded businesses. "We do not think of them as 'stocks,' pieces of paper, whose share prices fluctuate daily and may or may not at any point reflect accurately the value of an underlying business," Baron said. The Baron Capital chairman and CEO has been known as a longtime bull in Tesla , a stock with a 46% weighting in the Partners fund. The investor revealed that his firm made over 15 times its investment in Tesla since he first bought the EV stock in 2014. The longtime investor believes Tesla will be the largest company in the world in 10 years, and a decade later SpaceX will challenge it for that top spot. He made a $100 million private investment in SpaceX in 2022. His second biggest holding is CoStar Group , a data and analytics provider for the commercial real estate sector. A relatively new holding Baron bought in 2019 is Iridium Communications , a long-time provider of satellite phone communications. Baron's top holdings also include insurance company Arch Capital Group , Charles Schwab , FactSet Research and Hyatt Hotels . Baron Capital managed about $40 billion at the end of 2022.