What does “Contrarian Investing” mean? When Barron’s interviews you, are you no longer an “alternative investment” expert? You might be surprised to learn that James Dondero, co-founder and President of Highland Capital Management, is thrice blessed: contrarian, alternative and successful.
“Buy When Blood Is in the Streets”
You might be surprised to learn that some of the wealthiest individuals have held contrarian investing strategies. Marc Faber, James Dondero and Baron Rothschild all share this contrarian investment strategy. In fact, Baron Rothschild is known for one of the boldest contrarian investing quotes: “The time to buy is when there’s blood in the streets.”
On the surface, the concept seems somewhat irrational. It would take an “Alpha” personality to “buck the trend,” but if you look at the 2009 to 2017 bull market, it fits this template.
When the securities were at their lows in 2009 – that was the time to buy. Now, the contrarians might be cashing in their winnings.
The truth is that all winners have the same “Alpha” “cold-blooded” demeanor. It is similar to when Tiger Woods hits a 40 foot putt. During the March 25, 2017 Barrons interview, Investment Fund Manager James Dondero explained his “alpha analysts,” who cover up to a dozen high-conviction themes.
These portfolio managers provide the research, which gives Highland Capital a key edge. James Dondero explained that “roughly half of the fund’s assets” were based on high-conviction themes. He explained that the big themes drive the alpha and played-out themes might advance to the diversified bucket.
“James Dondero: Ice in the Veins”
Throughout his life, James Dondero has made tough decisions and been successful. Five years after graduating from the University of Virginia, James Dondero was managing $1 billion in assets for American Express. From this experience, he learned about nonbank collateralized loan obligations and was an early buyer.
James Dondero has continued to see opportunities while others “faint.” There might be “blood in the streets,” but those with “ice in the veins” see key opportunities and future profits.