Ron Baron has been analyzing stocks for over five decades. In 1982, he founded the long-term investment management firm Baron Funds, which now oversees $45 billion. Baron focuses on high-conviction growth stocks that he can hold long-term, making his investment approach a good one for retail investors to follow -- he typically doesn't flip stocks after a few months. With an estimated net worth of $6.5 billion, Baron's approach seems to have served him well. His 50-plus-years of experience also means he doesn't scare easily, even in the most volatile market conditions.
Baron put his conviction on full display recently after telling CNBC that he will not sell any of his personal holdings in a stock that has been crushed this year. One Wall Street analyst is similarly bullish. Should you follow Baron and buy this historically strong-performing stock?
Sorting through the intense volatility
Few stocks, especially in the large-cap space, have been more volatile over the last six months than electric car maker Tesla (TSLA +2.57%).
During the presidential campaign, Tesla CEO Elon Musk threw his weight behind President Donald Trump, and when Trump won the election, it looked like Musk had made the right bet. However, often what goes up comes down, and this proverbial expression rang true for Tesla, which has quickly given back its post-election gains. Analysts and investors have started to spot clues suggesting Tesla's deliveries in the current quarter are not trending well and have been quick to sell the stock, which previously traded at a nosebleed valuation. Other disturbances in the broader market haven't helped.
NASDAQ: TSLA
Key Data Points
Baron first invested $400 million to $600 million in Tesla between 2014 and 2016 and hasn't looked back since. While Baron's fund trimmed a small amount of its Tesla shares in the fourth quarter, Baron said he will not follow suit himself: "I'm the last in, I'll be the last out. So I won't sell a single share personally until I sell all the shares for clients, and that's what I've done."
Baron did say that he hopes Musk "would be a little less visible, but [Musk] feels that this is the way he's going to get things done," adding that Musk is "more charged up about his business now than he's ever been."
Baron isn't the only one going to bat for Musk and Tesla. In a recent research note, Morgan Stanley analyst Adam Jonas reiterated his overweight rating on the company. Jonas acknowledges that shares could remain volatile and places a bear case price target of $200 on the stock. But his bull case target is $800, which implies 220% upside from Friday's closing price of $249.98. Jonas' price target right now is $426, and Tesla is his top idea.
Jonas doesn't think investors are fully pricing in what artificial intelligence (AI) could mean to Tesla. The analyst predicts that Tesla will benefit from catalysts this year such as testing its robotaxis, new government rules on autonomous vehicles, and more information on the company's Optimus robots, which are reportedly being designed to take care of household chores.
Should you buy Tesla?
With Tesla stock down roughly 38% this year, it might be tempting for investors to buy the dip, but I'm still personally staying away. The stock ripped higher after the election apparently because of Musk's relationship with Trump and the potential for deregulation. While deregulation could help the company, there are still many questions about AI. I expect AI to become a prominent part of the world, but it's hard for anyone to size the revenue opportunity for Tesla's AI businesses right now and try to guess potential adoption. Plus, even after the decline, Tesla still trades around 90 times earnings estimates for the next 12 months.
