“We became successful by buying great businesses and holding on. We didn’t get to be successful by buying and selling.” ~ Ron Baron, Founder, CEO and Chairman Baron Capital
In a world focused on short-term results, fads, and news, most people overlook the power of acquiring and holding valuable assets. It’s important to adopt a mindset that emphasizes the long-term benefits of ownership.
Ron Baron’s philosophy: Not taking risk is the greatest risk. Question everything. Standard of performance comes from the top (CEO). Belief before ability…The most successful people believe in themselves almost to the level of delusion. Obsession. Exceptionalism takes time.
Baron Capital’s Approach to High-Conviction Investing
Conviction is having a strong belief in the fundamental underlying value and growth prospects of an investment, based on thorough and ongoing research and analysis.
Investors with high conviction believe that their investment in a particular stock, asset, market sector, or investment strategy has a solid foundation and is likely to succeed over the long term, despite market volatility or contrary opinions.
Conviction is an integral risk management mechanism. While diversification is traditionally associated with risk reduction, Baron Capital believes that investing more in the companies they know best results in lower risk. Thus, at Baron Capital, conviction-based investing is less a strategy and more a philosophy – a philosophy that honors the depth of insight over the breadth of selection.
Conviction-based investing is at the core of Baron Capital’s portfolio construction and management processes. Their strongest skill is their ability to thoroughly research and understand the inner workings of a business, analyze its growth trajectory and competitive advantages and how robust they are, and assess how qualified and motivated management is.
“Owning awesome businesses and holding on to these great investments for the long-term, not buying and selling, is the secret sauce to build wealth.” ~ Ron Baron, Founder, CEO and Chairman Baron Capital
References:
- https://www.baronfunds.com/conference-2023
- https://www.baronfunds.com/sites/default/files/quarterly-report-9.30.2023._0.pdf