Billionaire Baron Bets Big On Tesla

Ron Baron knows a thing or two about investing in the stock market. His company manages more than $21 billion of other people’s money. He himself has become a billionaire in the market. He is not a day trader. Rather, he looks for stocks he thinks will be successful in the long term.

Ron Baron on Tesla

Speaking to CNBC’s Squawk Box on Tuesday, he said that Tesla Motors is a stock he expects to own for the next 10 to 20 years. “I think this could be one of the largest companies in the United States and the whole world.” His company presently owns about $300,000,000 in Tesla stock, accumulated over the past three years. The average share price his company has paid during that time is $210. “I think in this one investment we can make $6 or $7 billion” over the long term.

Baron says he visits the Tesla factory regularly. “I go there every three or four months. I look at the factory and see how much is changing.” He likes what he sees. “The competition is not anywhere. They could have caught him four or five years ago. But they can’t catch him now. He’s too far ahead.”

Last month, Tesla raised $1.46 billion in fresh capital from the sale of its 6.8 million new common stock offering, according to the Thomson Reuters–owned market research firm International Financing Review. “I don’t think [Musk] is going to be back to the market for quite a while, if he’s ever going to be back to market for equity again,” Baron said. “Throughout his whole operation, he has the opportunities to invest small amounts of capital and have high rates of return.”

Baron sees what many people miss about Tesla. It is not a car company that happens to make batteries. Ultimately, it will be a battery company that also makes cars. Recently, Global Equities analyst Trip Chowdhry advised his clients that the Gigafactory Tesla is building in Nevada will generate as much as $100 billion in revenue for the company over the next 20 years. Baron agrees. “They can do as much sales in batteries ultimately as they can in cars,” he says.

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.