Stocks are up only 10% since 2007

Billionaire investor Ron Baron says shares are cheap, at least historically.

By MSN Money Partner Nov 8, 2013 3:51PM
Financial Stock Chart © Kick Images, Photodisc, Getty ImagesBy Matthew J. Belvedere, CNBC

Despite hovering around record highs, stocks are "cheap on stock valuations alone," said billionaire buy-and-hold investor Ron Baron in a CNBC interview on Friday from his annual investment conference in New York City.

To make his case, Baron provided a history lesson: "From 1999 to now, companies' earnings have about doubled. And the stock market is up 20 or 30 percent. From 2007, it's up maybe 10 percent. People say how much it's up, but it's only up from where it crashed."

As for valuations, he said on Squawk Box that at the height of the Internet bubble "in 1999 the stock market was selling for 33 times earnings." Stocks are now selling for around 14 times, he said. "They're cheap on stock valuations alone."

The Baron Capital chairman and CEO formed the investment company that bears his name in 1982. It currently has $23.8 billion in assets under management. The family of Baron funds have all returned at least double-digit gains in the past five years.

Being a long-term investor, Baron said he doesn't pay much attention to speculation over when the U.S. Federal Reserve might taper it's $85-billion-a-month bond-buying and its impact on inflating stock prices.

"The Federal Reserve is obviously going to some day stop doing that. I guess maybe it's not even obvious they will. I presume that they will," he said, adding that interest rates -- which the Fed plans to keep near zero for the foreseeable future -- are also "so far below where they normally are."

Baron observed that the central bank is in a tough spot: "The economy has too much leverage, and they still have to make it worth less and make it more affordable."

But if the Fed were to increase interest rates right now "it would be a big penalty to growth and the economy," Baron said.

More on CNBC


Nov 8, 2013 5:19PM
So Ron Barron is saying that 14 times earnings is cheap?  Is 10-15 not the historical average for a stock?  
"at the height of the Internet bubble "in 1999 the stock market was selling for 33 times earnings."
Why on Earth would we want levels that are FROM THE HEIGHT OF THE BUBBLE?  By their very definition they are inflated, can't be sustained and will fall.
Nov 8, 2013 7:15PM

Markets are up slightly more than 10%.  S&P up about 12.8% since its high before the crash and the DOW is up about 12%.  However, this is misleading as it only considers the index highs.  It does not consider the buying opportunities or dividends.  For people who continued to invest funds and reinvest dividends, gains have been much, much higher.

Nov 8, 2013 5:10PM

That is precisely why one should read. Diversity in opinion is a very good thing.

Both articles are based upon concepts put forward by some very successful folks.

Both are insightful. I use information for what it is. Information. Others use it to decide the pathway of life. That is foolish. Unfortunately the majority are very foolish.

When everyone is jumping on a bandwagon, I depart. I never stopped buying after the tech bubble or after barney frank and friends sent the country in an economic downturn. My methodical ,stay the course style means one thing. Success. It has never been hard to do well off the market.

Nov 8, 2013 7:18PM
When the conversation deteriorates to Bush vs. Obama then the investors have left the building.  The market has been very good to me for the last 30 years.  TY Oakmark, Vanguard & DFA.  Mad money account is in TRST, WPRT, AIG, CVE, BBY and others with leaps in WPRT and soon TSLA.  The last 2 will put me in the driver's seat of a McClaren.  If they bust at least my pick-up is paid for.  Such is the market. 
Nov 10, 2013 2:06PM
Sounds like Ron Barron is getting ready to sell and wants others to pump the stocks up.
Nov 9, 2013 1:51PM
Their going to add mental health to obamacare. This may save America. All those with narcissistic personality disorders will be locked up in mental instructions. No more congress, no more president, no more federal reserve. We'll be free again. Thank God almighty free at last!!!!!!
Nov 8, 2013 5:31PM

Think the Historical average on P/E's is 15-16 on the S&P 500..

But I've always felt staying below 20 is a good rule of thumb...

Because there are 4-5 other indicators or fundamentals that are just as important.


Throwing out 3-4 issues or positions, our overall average on P/E's is about 11-12..

With all added back in it is near 16-18....It moves and varies.

Nov 9, 2013 10:15AM
Statistics are great tools to prove a point that is not relevant at the present time. Obviously the intent of the writer was to paint a negative picture. If you do the same analysis beginning with 2009 the results are much different and more positive.
Nov 11, 2013 8:59AM
I think stocks were expensive in 2007 and I think they are a little high now.
Nov 9, 2013 7:43PM

Homer, great that you gave someone a thumbs up...I don't really put much stock in them..

Too many morons and crazies out and about...

Give myself one every few days or so, ONLY for balance; You know like 3 and 3 or something?

Give a "coveted" one about once a week...To someone else...Don't really know why ?? 

Might have gave you my weekly but don't remember ?


Crazy.....Impeach the "turd"....That's no way to talk about a sitting President..arf, arf.

I'm almost ashamed for you...arf.

Nov 9, 2013 1:15PM

"But if the Fed were to increase interest rates right now "it would be a big penalty to growth and the economy,""        


 B__l S__t:, demand creates growth and we have a taped out consumer. If the fed were to keep the inflation rate between a deflationary 1% and 0% inflation interest rate may increase some (5 year treasuries 2.5%, 10 year 3 to 3.25%, 30 year 4%) but I doubt this would stop growth. Plus money would move to America because savers would be earning real interest not interest less inflation. Plus, the consumer would have additional power.


I have never seen an economy this ridiculous. We should be growing at 4.5% and what have we got, a fed that is there for the top 1% and not for America, a president that is a liar, and a congress brought and paid for by vested interests.

Nov 9, 2013 1:25AM

I'm sure Baron's values of holdings have changed much more than 10% of what the highs were in 2007...

Indices may only have changed 10-15% since then as an increase...

But as already said, actual portfolios could have gained much more...


Although buy and holding long term may work for some issues...

Actively trading and managing accounts, to optimum gains can be more rewarding..

And to have a gain of 10-15% since 2007 is quite paltry..

If that is all I could expect from a broker, financial advisor or fund manager...We might as well eliminate all risk and have everything in CDs or something else extremely safe..

Nov 17, 2013 9:08PM

When your a billionaire like Ron Barron, it's easy to say stocks are cheap. Most people or investors in this country cannot "gamble" as much in the market. Of course this is his bread and butter, so most money managers are always pumping the market. If he were to say the market is bad, he would probably lose most of his clients, and in turn, lose some of his millions.


 So, don't follow these :gurus", do your due diligence, make some profits, sell some, and let some ride. Do this with many different stocks in different sectors, and that's how to make money in the market. That is what most money managers do in your mutual funds.


  Trust your gut, that helps too, and NEVER FALL IN LOVE WITH A STOCK!

Nov 10, 2013 6:49PM
Nov 8, 2013 7:00PM

Stock valuations in a bull market are almost meaningless.  It's about the trend that is important.  Investors will not buy if a PE is 2 if the company is on the verge of bankruptcy and that price reflects that relative risk of losing even more.

A bull market and it's inverse, the bear market will run until it has run it's course.  Whenever and at what price it will be at is pure speculation. 

You ride that wave until it dies out and then get off, or when you are satisfied with your gains.

What you don't want to due is ride the wave all the way back down as the next trend.  You've wasted both time and profits.

Nov 9, 2013 4:54PM

I've been getting it for a long time V_L.....

But one thing I don't do, is let most of the Politics or Personalities make most of my investment decisions for me..

I've found I do much better in a selection process, by taking emotions out of the equation...


Although Policy can make a difference, even Worldwide; Normally one or two people have little effect on what we do or accomplish in life....Unless it is a Parent, Spouse or one's Child. 

Nov 9, 2013 12:32PM

I did a comparison of 21,000 shares of different equities last night, it didn't post.

Not worth doing again...

But it would depend on value or average values, dividends or dividends re-invested, and then term.


One scenario was an overall value of $63,000..

The other value was $840,000..

So with those types of variables, it is hard to determine whether an investment is great or not..?

Any of us can say we have 21,000 shares of Apple or maybe all in General Electric; But bottom line, that is not a sensible or conventional way to invest... 

Nov 8, 2013 4:33PM
OH lawdy, The top article for today is about Warren Buffets stock price ratio to GDP is getting to warning signs of over inflation of the stock market.  Now you are telling me they are cheap HA what a hack job with the person in charge of headlines today.  In their defense QE exists so meh, you will see contradicting articles like this.
Nov 8, 2013 6:47PM
I have no problem with the growth rate as my 21,270 shares have collectively done quite well.over time.
Nov 9, 2013 8:16PM
That was enough poli-sci for me, think I'm going to a Casino...ciao.
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