The Power Behind Musk: Ron Baron's 700-Fold Return for Clients Over 34 Years

Billionaire investor Ron Baron has built one of the most distinctive records on Wall Street by doing something that sounds simple and turns out to be rare: buying companies run by people he trusts, and then holding them for decades.

Baron Capital, the firm Baron founded in 1982, says it has generated roughly $71 billion in profits for its clients since 1992 — about 700 times the firm's early capital, compounding at around 21 to 22 percent a year. The firm began with $5 million that George Soros's Quantum fund gave Baron to manage under the code name "Mandrake," reached $100 million by 1992, and today runs about $69 billion.

No relationship illustrates the approach better than his backing of Elon Musk. Baron first met Musk at Tesla's IPO roadshow in 2010. Impressed but cautious, he waited four years to see whether the electric carmaker could hit its production goals. Between 2014 and 2016, Baron Capital invested about $400 million in Tesla. That bet has produced roughly $7.7 billion in profits so far.

He then repeated the pattern with SpaceX. Starting in 2017, while the rocket company was still private, the firm invested about $2.5 billion, much of it through employee tender offers. Baron Capital now owns about 1.25 percent of SpaceX, a stake worth roughly $25 billion, and Baron bought another $1 billion of shares at the company's public offering to avoid being diluted.

His expectations remain characteristically large. Baron believes SpaceX could be worth $20 trillion to $50 trillion within a decade, with the Starlink satellite network alone potentially worth $14 trillion to $15 trillion. He expects his Musk holdings to multiply several times over again in the next ten years.

Baron's philosophy starts with people rather than spreadsheets. His analysts are told to take a business apart mentally and reassemble it, and to ask questions as if their own family's welfare depended on being right. He refuses to invest in even an excellent business if he does not trust or like the person running it, and he prizes partners who honor a handshake deal even when it costs them. Exceptional results, he argues, require exceptional patience.

For ordinary savers, his advice is notably unglamorous: he recommends index funds for most people. He treats inflation of 4 to 5 percent a year as the one near-certainty in markets, and he does not invest in cryptocurrency or gold.

Baron has said he does not expect to sell his personal Tesla or SpaceX shares in his lifetime, and has committed to not selling his own Tesla stock until his clients have sold theirs. In an industry built on trading, his edge has been the willingness to wait — first before buying, and then, for decades, after.

Source: CNBC