“Don’t...Stop...Thinking About Tomorrow.” Fleetwood Mac. 28th Annual Baron Investment Conference. October 25th, 2019. Metropolitan Opera House, NYC.
Christine McVie of Fleetwood Mac wrote those iconic lyrics. Fleetwood Mac is one of the most successful rock bands of all time and another Rock ‘n Roll Hall of Fame inductee to appear as the surprise entertainment at a Baron Funds’ Conference.
The perspective of those lyrics is remarkably consistent with our optimistic investment outlook...and is on point with the “What’s Next?” theme of the 2019 Baron Conference.
Again, more than 5,000 Baron Funds’ shareholders, Baron institutional clients, service providers to our Firm, and executives of businesses in which Baron has invested attended our annual meeting. As has been the case for the past 14 years, the 2019 Baron Conference was held at the Metropolitan Opera House at Lincoln Center in New York City. Since demand to attend has continued to grow, we now occupy several venues on the Lincoln Center Campus for “breakouts” and lunch, including David Geffen Hall, David Koch Theatre, and Alice Tully Hall.
Baron focuses on the future. Our view that the future will be better than the past drives our investment process. When choosing businesses in which to invest, we rely on exhaustive, proprietary, primary research conducted by our talented team of analysts and portfolio managers. We seek to answer the question “What’s Next?” by focusing on what we think matters most…long-term growth opportunities...durable competitive advantages...and management values.
Those are lessons I learned even before I began my career as a professional investor. In fact, I believe my foundational concepts about investments were really formed from 1966 to 1969. That was during my 3.5 years as a U.S. Patent Office examiner by day...and as a George Washington University Law School scholarship student by night.
“Competitive Advantages”
In the Patent Office, I learned to evaluate big ideas...and learned that unique, non-obvious
inventions with issued patents provided barriers that protected businesses against predators. As investors, we are trying to find barriers to competition, “moats,” whether they are patents or anything else. We believe “moats” enable businesses to become sustainably profitable.
“Question Everything”
In law school, I learned to be skeptical, methodical, open minded, and to “question everything.” The objective of our “question everything” stratagem is not just to attempt to understand a business, but to continue to question and probe...and probe some more...until we are certain that is the case.
Dean Dan Huttenlocker of the MIT Schwarzman School of Computing visited me for breakfast in early January. He told me that he learns a lot about people from their questions. In fact, Dan said that he actually learns more about someone from the questions they ask him than from their answers to questions he asks!
“You are an extremely inquisitive person,” he told me. “The level of detail in which you are interested is something that as a teacher I don’t often see. As a teacher I am always interested in how do people know if they understand something. Your style is to try to build a deep level of understanding. If something seems sensible to most, they think they understand. You’re different. You keep questioning and probing to test your understanding until you are satisfied that you get it. We try to get MIT students to do that.” I told Dan that it was so interesting for me to speak with him...and “questioning, which leads to understanding is exactly how we train our analysts to think.”
“Summer of ‘69”
I moved from Washington, D.C. to New York City in the Summer of 1969. After several unpleasant months as one of the faceless unemployed during a tough recession, I persuaded Tony Tabell to hire me as an analyst at stock brokerage firm Janney Montgomery Scott...my first job on Wall Street. To most, 1969 probably seemed like the worst of times to begin a career on Wall Street. My parents were especially upset when I left law school with one semester to go and changed my career path from law to finance.
1969 marked the end to one of the most turbulent decades in America’s history. Although the theme of Baron’s 2019 Annual Conference was “What’s Next?”, in 1969 many were concerned there wouldn’t even be a “next!” And yet...chaotic, disruptive times have always been the best times to invest! We believe now like 1969 is such a time. This was the principal message of my Baron Conference speech last fall. In general, few individuals I know are as optimistic about America, its institutions, and our adherence to the Rule of Law as I am. In fact, I have never been more optimistic about the long-term opportunities for our nation as I am now.
“Conference Day”
For two hours beginning at 6 a.m. on October 25, 2019, before our conference began, Becky Quick, co-anchor of CNBC’s Squawk Box, interviewed me and then she and I spoke with several CEOs of businesses in which Baron has invested. Then, Baron shareholders heard from Robyn Denholm, Tesla’s (TSLA, Financial) Chairwoman; Rachel Stern, VP and General Counsel of FactSet Research Systems (FDS, Financial); Bruce Flatt, CEO of Brookfield Asset Management (BAM, Financial); and Gwynne Shotwell, President and COO of Elon Musk’s Space Exploration Technologies Corporation (SpaceX). All spoke candidly and answered questions, no holds barred. We thought it was a fitting tribute to women that, for the 100th anniversary of Women’s Suffrage, women’s right to vote, three of our four executive speakers were female business leaders…and three of our four entertainment acts featured female singers and a ballet dancer!!!
The companies these executives represent are all important holdings of Baron Funds and most have appreciated significantly since our purchases…and, we think, will continue to grow substantially. The executives’ presentations were streamed live and can still be viewed on our website, www.baronfunds.com. Just click on the 2019 Baron Investment Conference link.
Before lunch, we raffled two 2020 Tesla Model 3s to two lucky Baron Funds’ shareholders. The first person whose name we randomly called was in the restroom when her name was announced and wasn’t able to respond when her name was called. We felt badly about that…so we made an exception to our rule this year and gave away two Tesla Model 3s!!!
One more thing. Tesla wants to be sure you know that the two Tesla Model 3 prizes given were paid for by our privately owned investment management company, Baron Capital Group, not by Tesla. We also want you to know that the ”door prize” gifts to our shareholders, the lunchtime and end of day entertainment, and all other expenses incurred for our annual meeting were once again paid for by us, by our privately owned management company, not by you or Baron Funds.
Our special end of day entertainment draws Baron shareholders from virtually every state…as well as from other countries. We think, though, that the conversations with Baron executives and leaders of businesses in which Baron Funds invests keep our shareholders coming back…even though our entertainment is not exactly “chopped liver” …as they say…
This year was no exception. During lunch, Baron Funds’ shareholders were entertained in three Lincoln Center Campus venues. In David Geffen Hall, we reunited two of the funniest names in comedy (one name actually… “Steve”). Stephen Colbert and Steve Carell, “The Daily Show“ correspondent alums, entertained with nonpolitical humor. In David Koch Theater, we switched things up and featured an incredible dance performance by sensational ballet dancer Misty Copeland and her amazing ensemble. Finally, in Alice Tully Hall, shareholders were dazzled by R&B icon and five-time Grammy award winner Mariah Carey.
After lunch, our afternoon at The Met was very cool as well…as seven-time Tony Award nominated actress and singer Kelli O’Hara opened our afternoon program with Leonard Cohen’s “Hallelujah” followed by Irving Berlin’s “God Bless America,” our traditional opening for the Conference’s afternoon session.
A Baron portfolio manager panel moderated by Amy Chasen, Baron’s Director of Research, followed. Linda Martinson, our Firm’s President and COO, followed the panel with her own inimitable take on our “What’s Next?” theme that is reprinted in this report. My speech, which highlighted “What’s Next?”, was next and is also reprinted following this “Letter from Ron.” You can watch my presentation as well as Linda’s and our portfolio manager panel at www.baronfunds.com. We are pretty sure you will not find them boring. Finally, at 2:45 p.m., the time came for some rock ‘n roll! Fleetwood Mac with Stevie Nicks, a musical act known, like we are, for “Going Their Own Way,” left our audience cheering. By the way, I think Fleetwood Mac and Stevie enjoyed playing for our enthusiastic crowd as much as we enjoyed hearing them.
If you didn’t have a chance to join us at our 28th annual conference, we hope you will visit us next fall at our 29th on October 30, 2020. Registration begins on August 1, 2020. Thank you for joining us as fellow shareholders in Baron Funds. We will continue to work hard to justify your confidence in us.
Respectfully,
Ronald Baron
CEO and Chief Investment Officer
January 9, 2020
The discussion of market trends is not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this presentation reflect those of the respective speaker. Some of our comments are based on management expectations and are considered “forward-looking statements.” Actual future results, however, may prove to be different from our expectations. Our views are a reflection of our best judgment at the time and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
