Famed mutual fund manager Ron Baron of Baron Capital is known for his relatively conservative, long-term approach to stock picking. He's a Warren Buffett of sorts, maybe most acutely in his love of putting pen to paper in shareholder letters and discussing why he invests in certain stocks that fit into his overall investment philosophy. Historically, he has had a management style that has had less risk and lower volatility than peers, according to Morningstar data. But where Baron takes more risk than you might expect is with Elon Musk's electric car company. In his most recent quarterly letter to shareholders of his funds, the fund manager discussed why he has made a big bet on Tesla Motors. "We are a fan of Tesla's business and of Elon Musk," Baron wrote to fund shareholders in his recent investment update.

All of us will likely be Tesla customers in 25 years Ron Baron CEO and chief investment officer, Baron Funds

Tesla fits the "built to last" model that Baron—and some other notable investors, namely Buffett, look for in long-term investments. (It's also the theme of this year's Baron Investment Conference, being held on Friday, Nov. 7.) In the same letter Baron made a comparison between LVMH, Apple, and Buffett, quoting from an anecdote in which Steve Jobs asked the LVMH chairman Bernard Arnault about retailing. "I don't know if we will use Apple products in 25 years, but I am sure we will still be drinking Dom Perignon," Arnault was quoted as saying.

Read MoreWhy Warren Bufett is always betting on bank stocks "That is Warren Buffett's playbook. That is why businesses owned by Arnault ... Buffett ... and Baron Funds are 'built to last.'" Baron wrote. So will we be drinking Dom Perignon in our Teslas 25 years from now? Baron seems to think the company's outlook is bright.

A man walks by a Tesla dealership in White Plains, New York. Scott Mlyn | CNBC

Baron thinks "all of us will likely be Tesla customers in 25 years" because its competitors are already being compelled to build and sell electric cars. "They do not want to build such cars," Baron wrote. "As a result, they are developing electric expertise so slowly that the lead Tesla has built up through its fast growing staff ... may soon become insurmountable." He argues that between plant retrofits for engine parts that aren't easy, and union and dealer resistance based on potential loss of jobs and sales, the car companies are their own worse enemies. That he believes will be key to Tesla's continued success. "Tesla's car culture is far different from that of other car companies," Baron wrote. At least, all car companies except for BMW. Baron noted that two of his analysts recently visited BMW in Germany and the BMW financial team believes that a "revolution in the drive train is underway. ... We believe that BMW will likely phase out internal combustion engines over the next 10 years," Baron wrote.

Tesla's wild stock ride—from $28 in 2012 to as high as $291 earlier this year, and up again on Thursday after earnings—might make it seem an unlikely stock pick for a relatively conservative manager, especially after one Wall Street analyst predicted a Tesla stock chart straight up to $400.

But Morningstar analyst Laura Lallos said current stock momentum or a high price-to-earnings ratio is not how a long-term manager like Baron would evaluate the company. Baron funds Tesla exposure

(Source: Baron Funds. The Baron Opportunity, Partners and Focused Growth funds all hold significant stakes in Tesla—though these are relatively small mutual funds in terms of net assets and compared to Baron's flagship Growth Fund, which has $8 billion in assets.)

Baron Opportunity Fund: 2 percent

Baron Partners Fund: 8.7 percent

Baron Focused Growth Fund: 3.2 percent

The long road