Ron Baron is the founder of Baron Capital Management. The firm manages nine mutual funds as well as separately managed accounts for high-net-worth individuals. Many portfolio managers have moved away from buy and hold strategies, or have considerably shortened their definition of buy and hold. Baron, however, continues to hold stocks for at least five years on average. He has beaten the market by a considerable amount over the long term using this strategy.
Baron is personally worth $1.4 billion, according to Forbes, and ranks #879 on Forbes' list of billionaires. His firm manages $18.5 billion. He’s currently bullish on the stock market. Just a week ago on CNBC, Baron said he believed the market was set up for another long upward run. He noted that the earnings of S&P 500 companies had doubled in the past decade, but the prices of their stocks were flat. He compared this to the flat market period between 1967 and 1980.
Let’s take a look at Baron’s seven top holdings. All allocation references are for the end of Q2 2011.
Factset Research Systems (FDS): True to form, Baron has held Factset stock for five years. It’s currently his largest holding and makes up 2.5% of his portfolio. Factset is a financial and economic information provider, primarily to the investment community. The stock has a P/E of 25 and a dividend yield of 1.2%.
MSCI (MSCI): This stock is Baron’s second-largest holding, making up 2.3% of his portfolio. MSCI is a $4.2 billion market cap company that provides investment decision support tools to clients worldwide. Products include the MSCI indices, Barra, RiskMetrics, ISS, FEA valuation products, and CFRA. Baaron owns about 9% of the company and is joined by Eric Mindich of Eton Park Capital Management, who owns nearly 6% of the company.
Dick’s Sporting Goods (DKS): Baron owns 8.8% of Dick’s. Citigroup just added Dick’s to its Top Picks List. The sporting goods retailer has a $4.3 billion market cap and sports a P/E of 20. It makes up 2.3% of Baron’s portfolio.
DeVry (DV): Shares of DeVry were crushed over the past month. The stock has dropped by a third since reaching 52-week highs in mid-July. Not that Baron would be worried, though. He has been a long-time holder of the stock and owns about 9.7% of the company. The for-profit education sector has a high degree of uncertainty currently, but shares trade at a 9.4 P/E. DeVrey has a strong balance sheet and has been a consistent earnings grower despite the regulatory threats out of Washington.
Gartner (IT): This information technology research provider is Baron’s fifth-largest holding. He’s owned the stock since 2007 and currently owns 9.7% of the outstanding shares. Noted small-cap value investor Chuck Royce also owns a bit less than 6% of the company. Gartner has a market cap of $3.5 billion and a P/E of about 30.
Mettler-Toledo International (MTD): This stock is a relatively recent addition to Baron’s portfolio, have been added at the end of 2008. The company is a self-described global supplier of precision instruments and services. It has a $5.1 billion market cap and a P/E of 21. Baron owns 6.3% of the company and the stock makes up 1.9% of his portfolio.
ITC Holdings (ITC): ITC also makes up 1.9% of Baron’s portfolio. The stock is trading near 52-week highs. It has a P/E of 25 and a dividend yield of 1.8%. They just announced a dividend increase a few weeks ago. ITC is the largest independent electricity transmission company in the country. They operate high-voltage transmission systems in several Midwestern states. The stock price has risen steadily from $20 since it began trading in 2005 to more than $75 today.