Ron Baron, Baron Capital chairman & CEO, shares where he is his seeing long-term investment opportunities in technology and brick &mortar plays. Ron Baron was on CNBC this morning.
Video and computer transcript can be found below
Baron’s Long-Term Theme Picks
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let’s get back to our special guest, ron baron, chairman and ceo of baron this morning. tom had a question, he was mid-way into the question when we decided to make some money with commercial breaks. i will go back to tom, ask the question. ron, i followed you with envy and greed forever and you have been the best at long-term picks of teams and themes. what you have done with hyatt with sands with starwood even in the hospitalities sector. wren you look at that sector, bricks and mortar an managers vs. what’s happening in tech, expedia, orbits, is there an intersection in which it’s going to start compromising those great companies? well, first of all, tom the way you do research, you live on your airplanement i never seen a guy travel more than you do. you meet more people than anybody i know. the reason you ared a good it’s because of. that you understand how it is to meet people, judge them, this past week we were in on tuesday, a travel week. so on tuesday, this is a travel week for me. you do this every single day. and this week we were in baltimore for a half a day on tuesday to visit under armour, since they have been a publicly owned company. i think we’re the largest investors, we made four or five times our money since we invested. every years ago you visit us, we visit them a half a day every 84. in the afternoon, we went down to reston, virginia where i used to ride my motorcycle out there in law school and resue a sign to visit that company, verisign, one of our funds has been purchasing. what they do, they have dot-net or dot-com, that’s them. they get $7.95 whether you are ron baron or becky quick.com. that’s a business that will grow from these whenever there is india or china, all those guys are coming on. they will benefit from that. more names will benefit. so farce figuring out in the intersection between technology and bricks and mortar, the businesses that we have invested in historically have been businesses, business models that can’t be challenged, that they’re going to exist. they’re not going to change a high toelt hole for electron, new trorngs protons flying around in the air. you got to stay somewhere. veil mountain, you got to ski somewhere. you don’t have to ski, if are you going to ski, they can’t make more mountains, so the businesses in general we invest in, transmission towers. there is something physical about them. a lot more than physical. there are poles, wires, you need them. the things we invested for the most part, they have big growth opportunities and technology, they’re making the world, they’re changing the world to all the, i watched these commercials on television, they say all the gods and service, 25% in the past ten years, technology is expanding in an exponential rate. there are all kind of things to ange it. hi, ron, it’s brian, verisign, highia. those are names i doubt you are mentioning them accidentally. what other industries or companies do you see this are truly irreplaceable and potentially under valued? wel, our firm has about 400 investments. so those just are a few. in the top ten, they represent 20 or 2% of asset the top 20 represent 30% of our assets. that’s because those businesses perform very well over time. our average holding period, i was talking before people trading the news the average holding period is seven years, seven years. tom’s like that, most public investors, hedge funds are days, weeks, month, we’re seven years ago five for a firm as a whole, so irreplaceable. electricity transmike, you got to have electricity transmission. energy, the ability to exploit all this shale oil and gas there. is as much shale oil and gas in the ground as all the oil that’s been taken out of the ground for the past 100 years. we’re starting to exploit that right now. that’s irreplace about. have you short line railroads. you can’t replace them. it costs a million dollars a mile if you can ever get zoning and can’t get the zoning. so we think, what we’re trying to do is whenever you have these long-term investments, then all of a sudden something will happen in the market and stocks will fall because of that something. so scientists have heart valves. when you get older, it calsifies. you can’t replace so it easily. these guys have 60% of the market for the hart valve. so what happens is, the doctor says, you know what, it’s risky. you ve to open heart surgery, open you up. when you do that, maybe you will survive. maybe you won’t if are you 80 years old, we’ll wacht. take medicine, rest a little bit. all of a sudden they come up with a new procedure where they can put the valve at the end of the kat their and not have open heart surgery and take months — go ahead. my question, though in all of this, it’s a question i water thinki about, doug sent in a similar question by e-mail as ump speaking. it said, why should stocks trade at the average price earnings multiple the last 50 years given the secular head winds to global growth and likelihood we are in a slower growth environment than in professor cycles. even if you are a long-term investors, i assume the gamble given everything, we will not grow as fast as before, if that is true, why should multiples hold up? well, the growth rate for the economy in america had been 6.8% a year since 1960. and it’s been about that rate since 1,900 as well. and for the past 14 years, it’s
Baron: Why Now is the Time to Buy Strategy
“You can’t store value in money,” said Ron Baron, Baron Capital chairman & CEO, explaining why he is “confident” in the markets and why short-term interest rates aren’t likely to go up any time soon.
markl continue it. let’s bring if another voice, squawk box reason baron e-mailed us saying now is the time to buy. he jones us right now. ron baron is the chairman and ceo of capital. thu for being here this morning. thank you for invitingme. thank you for coming to east hampton. you told us last week when we were worried about what we were seeing in the market that you were still very confident. why is that? well,irst of all, before i do that, i want to say hello to he’s an old friend of mine. not an old friend, a long-time friend, so one of my favorite investors and hi, andrew, hi, brian. so the reason i was confident is because the market was reacting to state of news, they’re reacting to, you know, what they’re watching on television the media, good news is good news himself, bad news is bad news, it’s unbelievable about the tapers. all you have to do is turn on the tele56 or read the newspapers, you would be negative. people can remember it within that long ago before it felt like the end of the world. and if keeping with what you saying now about the people from the federal reserve and the government offices trying to calm market nerves, this past week, i was at a dinner, maybe 14 or 15 managers, investment managers, one of my friend’s apartments the speaker was tim geithner the former secretary of the treasury. he was explaining how he thought that it wasn’t likely that the interest rates were short term would rise any time soon and he meant a for years and years. then he also said that as far as the ending of quantitative easings, he thought that was going when it ultimately began was going to take five years to wind down the bond purchases. and so i always believed and people are telling me something, they’re telling me something for a reason. he was telling me also presum to try to calm the market. but the reason why i think the market was so erratic is that you can react to news t. computers enable you to do trading quickly. people think they can become expert investors, whatever news is coming out, they think they have an advantage over everyone else. of course, they do, in fact, the reason they don’t, you can see it in the number that, the average person who invest in mutual funds makes 3% compounded. the average mutual fund makes for a very long period of time 7% and the reason they make the funds make 7 and the individual investors make 3 is very simply because people try to trade the news. they try to anticipate. the reason companies like financial engines morningstar and schwab and fidelity and financial advisers and iras, the reason they’re doing as well giving people advice. they should be staying and investing for the long term. we see these disruption over the short term or events that don’t seem to me very much, gives you opportunity to boy. ron, you just said a lot of re important things. first of all, i want to go back in case people weren’t payin close enough attention. that’s very kind of to you say that. say this again, you were at a dinner with tim geithner. he told you what about the markets? he looked at this and said the fed is going to be here very long time, essentially? he didn’t tell me. he told the room. told the room this, but this is pretty important. he was saying he anticipates that the rolldown, the tapering will take like five years? yes. and — by the way the roll down, when he says five years the roll down of the $85 billion bond purchases or? that was my interpretation. the people in the room were much more sophisticated than the monetary proses than i am and budgetary process, that itself quote. that’s what i took away. that is different than ben bernanke suggested. but as i said, that doesn’t mean that’s what’s going to happen. that’s his opinion of what’s going to happen. he was giving th reasons why. he was one of the people who wasinvolved with saving the world with bernanke. he was saying to the other investors, he said, you know, what do you think, how close were we to the end of the financial system, you know, existing? how close, do you know in 2008? how clo do you think that was to happening? and then everyone sort of made comments. i had read about it in andrew’s book. it was really close. that’s what he was going at. he said, why do you think we did all that stuff? carl icon was there also, he said, you know, he thinks they shou have let it go. he thinks all the people and all these banks, they shouldn’t be working there, anyway. they don’t have the interest of customers of mind. so that’s how some people get fined. i didn’t get an invitation to this dinner. whose house was this at? one of my friends. but your message that you are trying to reiterate, ron, that long-term investing is the way to do it and people underperform the mark when they try and jump in and out from all of these market blips along the way. yes. so i think, go ahead, i’m sorry. no, i’m sorry, go ahead, ron. so i think that people — so that was what happened. and the only person who i think has ever been able to predict this really well that i have seen in my career is gorge thoros. everybody thinks there is a perception impression. the only person i’ve ever seen who sort of comes close, i read about him in an obituary wear last week is george’s brother, he died at the age of 87. the story of george and palm, how they came to this country. it’s an unbeliev story. it makes you believe in genetics. what i believe is that the stockmarket has been through a difficult 14 year period of time, from 1999 until now. and there has been very little change and is back from 2006 to now the stockmarket is almost unchanged when companies earnings in general have gone up about 30% the stockmarket has changed very little about 1 or 2% a year since 1999 and company’s earnings have almost doubled.the reason for that is that the stockmarket in 1999 was overpriced. it is now 15-and-a-half, if you