Highland Capital Management’s Investment In Pendrell Corporation Makes Sense

Information technology investments have a huge impact on the service sector rather than the manufacturing sector of the economy. The service sector allows greater information technology enabled personalization as well as customization, according to James Dondero, the CEO of Dallas-based Highland Capital Management. Dondero knows that Information technology companies have a high potential for revenue growth, rather than a focus on cost savings. In the hedge fund world, revenue growth is the name of the game. Dondero used his information technology research recently to purchase an 11 percent stake in the IT company, Pendrell Corporation. Pendrell Corporation isn’t a recognizable name to some investors, but any company that has purchased an intellectual property license from Pendrell is well aware of what the company does, and the potential it has in the information technology industry.

James Dondero, the personable hedge manager and co-founder of Highland Capital Management, is used to finding gold instead of dirt under investment rocks. Dondero likes to invest in healthcare, consumer-driven companies, energy, and information technology companies, but he’s not afraid to invest in foreign governments and companies in emerging markets. Highland Capital Management has offices in Seoul, Singapore, New York and Sao Paulo, so he gets information from around the world, daily. What Dondero likes about Pendrell is the company’s ability to use the rights to more than 1,200 patents in the information technology sector, and then license them to other companies that manufacture and sell consumer-driven electronic products. The value of Pendrell stock was lower than expected, so Dondero got in before the price jumped. Highland Capital bought 13.5 million shares, and Dondero purchased 23.9 million shares.

Pendrell Corporation should produce the returns that Highland Capital Management partners are used to receiving in 2016, but there is no guarantee that will happen in the shaky economic atmosphere. Corporate profits are down in several industries, and consumer spending seems to be tapering off. But Dondero thinks the investment in Pendrell is a good one in spite of the current market trend. Dondero invests using research, current information, and his ability to see a winner before it becomes one.

This article recapped http://www.reuters.com/article/idUSFWN1AQ110