If 2017 were a movie, it could be called “Chasing Returns.” With US Treasuries and bank savings accounts paying such low returns, many have turned to alternative investment experts, such as James Dondero, co-founder and President of Highland Capital Management. Discover what Barrons said about James Dondero’s winning investments on March 25, 2017.
“Bold Bets = High Risk”
Some think they must jump on the next hot stock, investing all of their money to hit the jackpot. Unfortunately, that is leaving your investment decision-making in the hands of other parties, who manufacture the “themes.” What are investment “themes?”
Barrons notes that the James Dondero Highland Capital fund only holds 200 securities, while most hold twice as many. Furthermore, “40% of the assets can be concentrated in a handful of themes.” Investment professional James Dondero stated, “We could put them in the overall portfolio and not call them a theme, but then you are kidding yourself ….”
The disadvantage of themes is high concentration and low diversification. The advantage is – when you are right, you earn healthy profits, multiplying your gains. Some of Mr. Dondero’s themes include wind power, Argentina and nonopioid pain medication.
“Bold Bets = High Rewards”
When you hit the right “theme” and have multiple securities in that category, you amplify your winnings. That is why Barrons referred to James Dondero’s “bold bets.” But of course, the whole purpose of investing is to earn high profits.
Highland Capital gives you the ability to earn money on the three dimensions of a winning security. If you want to cash out, the fund can sell one of the securities and keep the rest – “letting them ride.” The investment strategy is quite brilliant, when you think about it.
Graduating from the “University of Virginia,” philanthropist James Dondero also supports charitable organizations, such as the “Reasoning Mind.” This encourages the development of important math skills in Texas students from pre-kindergarten to seventh grade. James Dondero said about boosting math scores: “That’s what we’re looking for — to make the biggest impact with our giving.”