On Dec. 9, JPMorgan
warned it would spend more next year than it had previously forecast. Shares tanked. Within days, the bank’s stock had recovered. That trading dynamic is a rapid-fire microcosm of an approach that billionaire fund manager Ron Baron says underlies a key part of his investment philosophy: making bets on the companies that the market is punishing in the short-term for spending on the priorities they need for their long-term growth.
Baron, the founder and CEO of Baron Capital, in recent years has become known for some big bets on high-growth, high-risk companies, including Elon Musk’s SpaceX, Tesla
and xAI. But in a recent interview on CNBC’s “ETF Edge” to discuss his company’s new exchange-traded funds, Baron said roughly 10% to 15% of the companies he wants to own are those being penalized by the market for doing the exact kind of spending they should be doing. Any short-term market reaction to spending plans, and any selling that is predicated on a current quarter earnings shortfall or market fears that the next quarter’s earnings will be dented, are reasons for a long-term investor to buy.
Baron broke down his portfolio approach by three distinct buckets, where the exact percentages may shift over time, but the overall philosophy that guides the stock picking remains the same:
