top 3 stocks in his growth portfolio

Billionaire Ron Baron is known as one of the biggest Tesla fanboys in Wall Street. He first invested approximately $400 million in Tesla in 2014 and made excellent returns when the shares surged. As we wrote here, he expects that the Tesla stock price will surge to $1,500 in 2025. But he owns other stocks as well as the portfolio manager of Baron Growth Fund. 

Baron Growth Fund has outperformed the Russell 2000 in the past ten years as it has jumped by 12.5%. Its performance has been in par with that of the S&P 500, which has grown by 12.3%. The fund has gained by 11% in 2023, bringing its total assets to over $6.8 billion. Here are Ron Baron’s top companies.

MSCI

MSCI (NYSE: MSCI) is a large part of Ron Baron’s portfolio. According to its website, it accounts for about 10.7% of the Baron Growth Fund. There is a good reason for this investment since MSCI is one of the best companies in the world. 

It operates a high-margin and relatively risk-free business of providing indexes that are then used by asset management companies like T. Rowe Price and Vanguard. MSCI has a gross margin of 82% and a net income margin of 38%, which is higher than that of tech companies like Microsoft and Apple. 

But MSCI is not a cheap stock considering that it has a trailing PE ratio of 50.82 and a forward multiple of 42. But it has more room for growth as the transition to passive investing continues. It also has a strong market share considering it competes with a small group of companies like Dow Jones and FTSE. MSCI stock price has jumped by over 17% in 2023.

Arch Capital Group

Arch Capital Group (NYSE: ACGL) is another financial services company that Ron Baron holds. It accounts for about 7.7% of its Baron Growth Fund portfolio. The company, which has a market cap of over $24 billion, provides three key products, including specialty insurance, reinsurance, and mortgage insurance.

Arch is a relatively cheap stock with a trailing PE ratio of 17.8 and a forward multiple of 11.3. It also has forward revenue growth of about 15%. These expectations have pushed the stock upwards by about 44% in the past 9 months. 

This growth has been helped by high-interest rates, upbeat earnings, the $1 billion share buyback, and the fact that it has one of the best return on equity (ROTE). 

Vail Resorts

Vail Resorts (NYSE: MTN) is another company that Ron Baron loves. It is a leading company that owns mountain resorts in the US and some European countries. It has a strong market share in an industry that is growing: ski resorts. Some of its top resorts are Keystone, Afton Alps, Kirkwood, and Rock Resorts among others.

Vail Resorts is a fast-growing company with year-on-year revenue growth of 34% and EBITDA growth of 57%. It is also a highly profitable company with an EBITDA margin of 32%. Ron Baron believes that the company will continue doing well in the coming years. Vail Resorts stock price has barely moved this year.

Ron Baron owns other companies in the Baron Growth Fund. The other firms in the portfolio are FactSet Research, Iridium Communications, CoStar Group, and Choice Hotels.