Ron Baron, founder of Baron Capital, spoke extensively about his investments in several electric vehicle companies during a CNBC interview last week. Most of the discussion centered around his firm’s investment in Tesla. Baron Funds acquired $387 million of Tesla stock in 2014. After recently selling 1.7 million shares (to mitigate risk for clients as the value of Tesla stock grew to 50% of assets), Baron’s Tesla holdings still represent $4.5 billion. Baron described the original Tesla investment as one he believed would grow twenty-fold. He still believes Tesla stock could reach $2,000 within ten years. In fact Baron thinks Tesla’s full-self-drive (FSD) subscription feature might become a $40 billion business, which alone is worth the current stock price. He believes Tesla’s EV business, battery business, ride-share business, insurance business, and solar roof business are all free to investors today which make a $2,000 share price reasonable.
Interestingly, Baron personally owns over 1 million shares of Tesla, and is not planning to sell any shares for a number of years.
EV is the place to be. - Ron Baron, CNBC interview, February 4, 2021
With most of the Ron Baron CNBC discussion focused on Tesla, I’m guessing many ignored Baron’s investment thoughts on General Motors. Baron believes certain electric vehicle companies will lead the global shift to EVs. He even mentioned GM’s recent announcement of an all-electric fleet by 2035 as evidence of the global transition to EVs. Baron’s specific investment in GM is a $10 million private share purchase in Cruise, the GM majority-owned autonomous driving subsidiary. While I believe the strength of GM’s legacy business will power the company’s transition to an all-EV future, it’s Cruise that will drive substantial new revenue from an entirely new, future robotaxi business. From previous newsletters, you may recall Cruise is now valued at $30 billion after additional investments by SoftBank, Honda and most recently, Microsoft. One of the ways to indirectly invest in Cruise is by owning General Motors, a stock that has grown 220% since the pandemic-driven market decline last year. And unlike owning Tesla, there has been no discussion from anyone about GM stock being overvalued.
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