Top stock mutual fund manager’s best advice for investors
When investing, past performance is no guarantee of future results. But if you hope to grow your money over the long term, there’s a lot you can learn from investment professionals with long and impressive track records.
Earlier this year, Analysts at investment research firm Morningstar It identified the three best-performing mutual funds over the 25 years ending in 2025. Winner: Baron Opportunity Fund, which returned 13% on an annualized basis. For reference, the S&P 500, a benchmark for the broad U.S. stock market, had an annualized return of 6.8% over the same period.
This month is coach Michael Lippert’s 20th anniversary.This Even though he’s been at the helm of the fund for a year, he’s quick to share the credit for Opportunity’s outperformance; He credits the ethos of the firm, led by billionaire growth investor Ron Baron, and the work of the team of analysts who helped him select investments for the fund’s portfolio.
Yet over the past quarter-century, Lippert’s strategy of identifying and investing in fast-growing companies that benefit from disruptive and innovative technological advances has put his fund ahead of nearly all others.
Lippert recently spoke with CNBC Make It about his approach to picking stocks, the lessons he’s learned from his career, and the advice he gives young investors. Be sure to consult your own financial professional before making a big move in your portfolio.
CNBC Successful: You and your team spend all day evaluating businesses. Which ones would you like to add to your portfolio?
Lippert: We really focus on companies that can grow for a long time.
They have resilience and sustainability of extreme growth because there is a large total addressable market they can appeal to. They have differentiated products or services, what we call a competitive advantage, so that they will capture a large market share of whatever that opportunity is, and they have the kind of business model that can translate long-term revenue growth into significant profit or free cash flow growth.
Where does long-term growth occur? How do you find it?
It’s really about relying on a team of smart industry and subsector analysts; so we can know industry themes, changes and trends that are occurring (trends that we consider to be robust and sustainable).
I use it sometimes S curve For this example, it’s something everyone learns in business school. There’s a lot of stuff here and there that’s exciting – NFTs, different things – and it never quite hits home. But once a major trend emerges, it can continue for a long, long time.
We experienced the first big trend in my career, the internet; We have now completed our 30th anniversary on the internet. We had mobile, then we had cloud computing. And now we are in the age of artificial intelligence.
We look at these trends, these themes, these major changes, and we think the S-curve could continue through what we call the business generation, maybe 10 to 20 years. For us, long-term investment is five years. We’re constantly rolling this around, so we’re always thinking at least five years ahead.
What characteristics do you see among the companies that are emerging as winners of these trends?
The best companies we found don’t just do one thing. The best companies don’t just have an S curve. They stack multiple S-curves on top of each other.
Each of the world’s largest companies, each of the “Mag Seven”, started out doing something different from what they do today. Apple started with computers, then it became the iPhone. It was Google search. We now have YouTube [and other business lines]. Amazon was selling books and everything.
What’s one big winner that you think makes your process exemplary?
We started working on Nvidia in 2017. We made our first investment in 2018, and at that time the whole world was looking at Nvidia as a video game chip company. If you remember, it was a somewhat volatile stock because at the time video game chips were also being used to mine bitcoin.
Our analyst Guy Tartakovsky and I have been thinking about the data center opportunity associated with AI today and how Nvidia is capitalizing on it. [graphics processing units] It will be positioned not only in games but also in data center applications. Our entire team visited [Nvidia CEO] Jensen Huang in the fall of 2018.
[Huang] We literally spent hours in front of the whiteboard teaching us about artificial intelligence and machine learning, [including] He asked why his architectures, originally built for graphics, would work for the applications he believed data centers would use. And why it’s going to win, and why it’s not just the chips, but their ecosystems and all the different libraries, all the things that lead them to win in AI. And we made an investment.
You obviously chose some losing investments. How do you deal with your shortcomings?
I have made many mistakes throughout my past. One of the books that was really influential for me was called “Startup Nation.” This is about innovation in Israel and why they have so much more innovation than they should for their size. And one of the things they researched is that in Israel you literally have to go into the army before you go to college. [In the Israeli army] They create an after-action report on each mission, whether successful or not. And especially when it doesn’t work, they really look at it to find out why.
I’ve already done that as part of my process, but I can’t tell you that I’ve sent quotes from that book many times. [to] My team said, “Hey, look, if we made a mistake, it’s okay. We’re going to make mistakes. Let’s not just push this aside. Let’s see. What can we learn from this mistake? What can we take away from this as it relates to our analysis of an industry, our process, whatever it is, and how can we iterate and continually get better?”
How do you separate real trends from hype when you’re constantly looking for the next big thing?
Fact-based investing. Look for the facts; When it comes to the world we live in today, the social media world, it’s about what’s real, not what’s exaggerated.
When it comes to the world of AI, if you go to X, you will spin yourself. You’ll find that someone will tell you that Nvidia is the greatest company in the world that can never be disrupted. And you’ll see someone else say, “No, it’s over. Nvidia is a great short.” And you will have this for every company.
The other thing I always say is step back for a second. Does it make sense? Does it make sense that blockchain technology will completely disrupt the payment system? Does this make sense when you know how blockchain works, and while we all love our rewards, will it really bother people who can just pull out their MasterCard or Visa? Will we give up on these?
What is your best advice for young and long-term investors?
Investing is easier than short-term trading. Find a company that you think is special, you can explain why it is special and different, why it should grow for a long time.
The way we think at Baron Capital when it comes to long-term investing [is] Each new product released every three months comes step by step with a set of data, facts and evidence. If you have more than one point on that curve, just mark the next one, the next one, the next one. It’s much easier than trying to figure out what’s going on on any given day. Which tariff will be released next? Which company will make which announcement, which podcaster will say what?
Today we live in a world where you own many vehicles. You may not have Baron researchers, but you do have ChatGPT or Gemini. “What did XYZ company report last quarter? What are its new products?” you can say. As long as it’s not a business-to-business product, you can test their products. You can use it. Does it make sense for this company to be a fast-growing company and continue to do so for a long time? That’s what I would do too.
This interview has been condensed and edited for clarity.
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