Hedge fund managers often struggle with important choices when they allocate their funds’ money among several categories of investments. Many hedge funds are investing a lot of money in information technology. In fact, information technology companies are sought after commodities in the hedge fund world. But there are several different kinds of information technologies companies in the industry these days. Finding one that can produce consistent profits in an industry that is changing at warp speed is the challenge. James Dondero, the President and manager of Highland Capital Management’s hedge fund, does a lot of research before he invests in information technology companies. But Dondero recently pulled the trigger in the IT sector, and he invested in Pendrell Corporation.
Kirkland, Washington-based Pendrell Corporation is an active intellectual property license. Pendrell represents more than 1,200 patents in the information technology sector. Those patent are mainly focused on electronic devices like smartphones, tablets, and other retail products. Pendrell is primarily a research and development company that buys other businesses that have interesting and unique technologies, and then offers their protected intellectual rights to the global marketplace. Dondero saw the potential in Pendrell, so Highland Capital Management bought a 6.5 percent stake in the company. Dondero bought another 11 percent stake in Pendrell, so the combined number of shares owned by Highland Capital and Dondero is more than 37 million.
The investment in Pendrell is a typical investment for Highland Capital. Dondero invested more than $4 billion in Argentina when he decided to buy debt bonds. Many of Dondero’s peers thought he was crazy when he made the first purchase of Argentina’s bonds in 2014, but the investment paid off for his partners. Dondero bought another sizable amount of Argentina bonds in 2016 when the new president of the country got the green light from the international bond market to sell them. Dondero believes the investment in Argentina and the investment in Pendrell Corporation will produce decent returns in 2016.