I’m a big fan of Ron Baron, the manager of the Baron funds in New York; he has an excellent track record for picking winning stocks and outperforming the market, observes Mark Skousen, editor of Five Star Trader — and a participant at the MoneyShow Las Vegas, Sept. 12-14. Learn more here.

I attend his annual investment conference in New York. My Forecasts & Strategies subscribers have done well with his two mutual funds, the Baron Partners Fund (BPTRX) and the Baron Growth Fund (BGRFX). These two funds alone have made me a millionaire.

Baron Partners Fund was ranked the #2 best-performing mutual fund over the past 20 years. His secret is that he invests in “people, not businesses.”

One of his favorite stocks recently appeared on our Five Star radar screen: Arch Capital Group (ACGL) is a Bermuda-based insurance company that is selling at a dirt-cheap eight times current earnings.

The company specializes in casualty, mortgage and reinsurance lines with above-average risk, and has been successful since its inception in 1995. Under the leadership of CEO Marc Grandisson and chairman Maamoun Rajeh, Arch has grown consistently worldwide.

The reinsurance segment continued to witness strong growth across most lines of business. In casualty, mortgage and other specialty lines, strong rate increases and growth in new accounts are expected to boost the top line.

It has profit margins exceeding 22%, revenues are up 12% to $9.5 billion and earnings have more than doubled to $2 billion. Its bottom line is being driven by increased premiums and higher net investment income. It has $4.5 billion in cash and only $3.2 billion in long-term debt. It does not pay a dividend.

Earnings estimates have been growing, now projected at $3.32 per share for the entire year, representing an increase of 144%. It reports in October and has beaten Street forecasts four quarters in a row.

Let’s add Arch Capital Group to our Five Star Trader portfolio and set a protective stop of $34. For those willing to take greater risks, consider buying the ACGL December $45 call options, which recently traded for $1.27 and expire on Dec. 17.

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