Contributor Since 2014
Scott Worcester is a technical analyst and mutual fund specialist. He has held various positions in financial sales and marketing for both Van Wagoner Capital Management and Bramwell Capital Management, overseeing intermediary sales and tradeshow marketing. He trades his own accounts (stocks, options and mutual funds) and writes for his own blog ablecharting.com, which melds together various investment styles in an ecclectic sort of way for educational purposes.
Recently on CNBC, billionaire investor and CEO/CIO Ron Baron of the Baron Funds, reiterated his long-term bullish position on Tesla, stating he could make 20x his money on the stock in the future. Some of his key points being that 1. Elon Musk and team are doing something that has never been done before and 2. If investors wait until the coast is clear, the best money could have already been made when what they could have done is introduce some risk into their portfolios by taking advantage of the short-term turmoil to create a position. Baron has pumped the Tesla story many times on CNBC in on-air interviews and in his company newsletters and maintains that the long-term story is well intact, despite the short-term woes the company is currently experiencing with the Model 3 ramp up. Some of the Baron Funds also hold concentrated stakes in SpaceX.
Sometimes when companies are private, difficult to purchase, or perceived expensive on a dollar basis to investors, one way to buy without buying it directly and often times a bit safer due to diversification, is to find a mutual fund that owns a significant %age weighting in it. Morningstar, the investment research firm, gives you the ability to search for a stock in this way. If you enter a stock symbol on their page, then click Ownership, then the Concentrated tab, it will tell you which mutual funds own hefty positions in your favorite stock in a big way. For some investors, this is a great way to go, when you may want to mix it in with other names and purchase a "basket," which by their nature, are what mutual funds really are (baskets of stocks, bonds, etc.)
Ron Baron runs a family of mutual funds (Baron Funds) that according to Morningstar, have over $23 BN assets under management (AUM). Since 1982, he and his team have established themselves as long-term investors and very research driven, known for conducting exhaustive study into the stocks that they own within their Funds. Their long-term approach is illustrated by the low turnover numbers they put up, and more specifically in two of the Funds that Baron manages, Baron Partners Retail Fund (BPTRX 26%) and Baron Focused Growth Fund (BFGUX 11%). With being turnover conscious, it is typically fair to say portolio manager's stances on their concentrated positions are unlikely to waver much.
The Funds mentioned also above happen to contain extraordinarily large chunks of Tesla in their portfolios (as of 3/31/18), and also another little known private company called SpaceX, and others that Baron would advocate have similarly bright long-term potential.
|Fund Name||Symbol||Tesla Weighting||SpaceX Weighting|
|Baron Partners Fund||BPTRX||14.69%||4.56%|
|Baron Focused Growth Fund||BFGFX||12.28%||4.45%|
SpaceX is accelerating rocket reusability to commercialize space with frequent and affordable satellite launches and other space endeavors, and is also revving up to launch Starlink (see HyperChange TV’s piece on Starlink), with the ultimate goal of getting us to Mars and beyond. Musk’s plan for Starlink is to bathe the planet Earth with many thousands of small satellites to bring broadband internet to the masses in every corner of the planet and in the process, deriving billions in subscription fees from the constellation.
SpaceX is a very successful and financially healthy company in its present private format and operationally, is accelarating its tempo for launches. 2018 will be a great year for SpaceX and it will build upon the stellar track record it has established thufar. It is increasing its value as a company and confidence and credibility in the government sector and space launch/aerospace community, despite fierce competition that will be mounting in the coming years. Recently CEO Gwyn Shotwell spent time at TED and discussed the future vision of Starlink and plans for earth-to-earth transport with the BFR (Big Falcon Rocket).
The future will be very exciting for SpaceX and for investors that get to participate in its growth. When SpaceX goes public (assuming it does well), said Baron Fund portfolio positions in SpaceX could experience immediate size portfolio percentage increases, and respective Fund investors could reap the gains then and over time when other institutions could only just beginning to buy in. Large percentage increases also makes the position more influential in the portfolio relative to the others and can steer performance. Some managers may want that, others not so much while they trim it back. Regardless, getting in early now gets investors in ahead of the IPO, assuming Baron doesn't cool to the name, which is not likely. Baron's love of Musk could open the door to other opportunities as they arise like with the Boring Company, which just won the contract to create an underground, high speed "Loop" connecting downtown Chicago with O'Hare Airport.
Baron and Musk share vision, and the early private placement in SpaceX is a testament to their loyalty to each other. When the day comes that SpaceX becomes public, Baron and all of the Funds he places SpaceX positions into, should see handsome gains depending on how they are realized over time. SpaceX, alongside Tesla Energy which is arguably reinventing the electric grid among other things, could very well be crown jewels in the Musk empire.
Coupled with his great long-term track record and array of other high quality companies in the mutual fund portfolios, Baron’s early stake in SpaceX before it is taken public, or rolled over into Tesla (another possibility in time) as a Tesla Space subsidiary, should be impetus enough for investors to take a look at his Funds before SpaceX hits the public exchanges.
In the meantime, the Tesla conglomerate continues to gather steam and Musk is about to once again prove the skeptics wrong as the Model 3 achieves his dream of a high end yet affordable mass market electric vehicle for the masses, which has always been part of his long-term Tesla master plan to change the world that we live in and to accelerate the world's move to sustainable energy, and more.
Investors would be wise to consider taking a position in the Baron Funds to obtain exposure to SpaceX and Tesla in order to benefit from both of the company's explosive growth rates and long-term potential.
Disclosure: I am/we are long TSLA.