Legendary investor Ron Baron shares the early contrarian lesson that's helped him return 1,843% over 22 years
Baron is one of the most successful investors of his time, amassing more than $41 billion in assets under management since 1982. His Baron Partners Fund (BPTRX) is up 1,843% since launching in May 2003, trouncing the S&P 500's 536% return and beating 99% of similar funds over the last 5-, 10-, and 15-year periods, according to Morningstar data.
But like all of us, he was once a beginner, too.
After studying chemistry and then attending law school, Baron finally decided he wanted to work in finance. With no job offer, he moved into a friend's basement in New Jersey until he could find work. His engineer parents weren't happy. But his uncle bought him a copy of Joseph E. Granville's " A Strategy Of Daily Stock Market Timing For Maximum Profit."
Reading it, Baron learned his first major lesson about investing: taking a contrarian approach to prevailing market consensus can pay off.
"What made sense in this book, which was not intuitive, was that when news was really bad, you're supposed to invest, you're supposed to buy things," Baron told the Economic Club of New York on May 13. "And when news was really good, you're supposed to sell things."
Essentially, don't chase returns on the back end of rallies when all the good news is already priced in.
It's time-tested advice that many investing legends espouse.
Warren Buffett's famous mantra was to "be fearful when others are greedy, and greedy when others are fearful."
Sir John Templeton wrote: "Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell."
Investor sentiment has been all over the place in recent weeks. After President Donald Trump's "Liberation Day" tariffs announcement, investors became exceptionally bearish on stocks. A month ago, CNN's Fear and Greed Index was in "Extreme Fear" territory. But the outlook has improved as Trump has started to back off from his trade war. Right now, "Greed" is the dominant feeling among investors.
Today, Baron is uber-bullish on Tesla, saying he believes its share price will grow 10x from current levels. The stock makes up 35% of his Baron Partners Fund.
While Baron doesn't trade short-term macro developments, instead betting on companies he thinks will outperform over the long term, he still applies the lesson he learned early in his career by being ahead of the consensus on the stocks he buys and seeing future outcomes that no one else sees.
"It's about being the opposite of what everyone else says," he said.
And when things are going awry in markets and the economy, Baron stays cool and thinks about the big picture.
"I just figure like John Lennon that in the long run, everything's going to work out. And if it doesn't work out, it's not the end yet," he said. "Sooner or later, everything works out. Man causes problems and then fixes the problems."
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