Ron Baron Is No Longer Satisfied With Triples

Imagine you are an institutional broker in the 1970s, buying small-cap companies such as McDonald’s, Disney, Federal Express, Nike, Mattel, Hyatt and some others. Between $1 billion and $3 billion, they were considered small-cap. You would recommend these firms to clients, buy them for yourself, and then flip them after they doubled and tripled in price. The problem, according to longtime and legendary fund manager Ron Baron of Baron Capital Management Inc. and the Baron Funds, and this week’s guest on the Masters in Business podcast, was that he then suffered as they rose 30-fold over the years.

This suffering was what turned Baron into a super-long-term holder of equities. He has owned shares of Charles Schwab since 1992, Choice Hotels since 1996 and Vail Resorts since 1997. His current turnover ratio is very low, ranging from 3% to 7% depending on the Baron fund. His mutual fund peers have turnover ratios that are often 50%, 100% and even 200% per year. The firm Baron founded in 1982 is known for a long-term, fundamental, active approach to growth investing. Today, it has $49.1 billion in assets under management, and 16 of 17 Baron Funds — about 98.3% of assets — outperformed their passive benchmarks since inception. The Baron Partners Fund gained 148% in 2020.

A transcript of our conversation is available here.

You can stream and download our full conversation, including the podcast extras, on iTunesSpotifyStitcherGoogleBloomberg and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Kevin Landis of Firsthand Funds. The firm’s Firsthand Technology Opportunities Fund was created in 1999, and has gained 21.1% annually over the past 10 years, compared with 13.9% for the S&P 500 Index and 18.5% for the Nasdaq Composite Index. It gained 102% over the past 12 months.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”

©2021 Bloomberg L.P.

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