Of all the stocks covered by analyst David Baron of the Baron Focused Growth Fund, Tesla has the most potential and is the most important stock. The fund does not intend to sell the manufacturer's shares, as it has a lot of confidence in the company.
Institutional investors have been clearing out of stocks. David Baron of Baron Focused Growth Fund says: “This is a pretty good buying opportunity. Even if there is a slowdown next year, a lot of stocks are pricing in pretty draconian earnings,” according to Market Watch.
To date, Baron's largest concentrated position is Tesla, accounting for 20.4% of the portfolio. Baron Funds acquired a large position at Tesla before it went parabolic and then stayed with it despite skepticism about the company's CEO, Elon Musk. Although the fund has reduced its position slightly after the big stock move in 2020, it still maintains a huge position.
“We see so much potential, we don't want to sell,” says Baron. “Of all the companies I cover and [those] analysts come pitch to me, the company I feel the most confidence in is Tesla.”
Baron believes Tesla's stock could triple in less than a decade. The manufacturer has created a strong brand without any marketing, and owns a 25% share of the electric car market. “People think we are going into a slowdown but demand for their cars has never been better,” he says.
Tesla delivered 1 million vehicles last year. Baron expects the manufacturer to deliver 2 million next year, and by the end of the decade, that figure will reach an impressive 20 million a year. An important factor is that Tesla produces high gross margins in the upper 20% range because its cars that sell for around $50,000 cost around $36,000 to make. In addition, the company's battery business continues to grow and Baron believes it could eventually become as big as the car business.
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