Individual investors should not throw in the towel, thinking they can't beat the widespread computer trading on Wall Street, billionaire buy-and-hold investor Ron Baron told CNBC on Friday.
The complex algorithms create a high-tech herd mentality in stocks on a daily basis, Baron said. He added that people who do their homework on companies with bright futures can profit in the long run.
Baron said when he sees stocks all going up one day and all down the next, that's not trading on fundamentals. "That's trading on computers. The computers are making stocks go up and down."
"If everything trades together … [and] you can figure out which businesses will become much different in the future than they are today, much bigger than they are today, that's opportunity," said the founder of Baron Capital, which has nearly $21 billion in assets under management.
Baron also reiterated a theme he's touched on in previous CNBC interviews: the power of compound interest. "Everyone's lifestyle has improved six fold net since 1930," he said.
He believes that trend is going to happen again, saying that's why he holds the stocks he invests in for so long.
"Baron Growth Fund the average holding period is 12 years," he said. "The average holding period for most mutual funds is a year, a year and a quarter; hedge funds days, weeks, months, seconds, nanoseconds, milliseconds."
"We have a very long perspective that sees us through very difficult times," Baron said.