Shooting for Hall of Fame Returns and World Class Service with Greg Dean, Langdon Equity Partners
Aug 9, 2023
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Greg Dean, Founder and Lead of Investor at Langdon Equity Partners, discusses the challenges of managing compounder companies within small-cap strategies. He shares insights on building a new investment firm and the cultural elements that are important. The podcast also explores the evolution of compounders in investing and analyzes the success story of Royal Unibrew in Denmark.
Creating the right environment is crucial for investment excellence, with Greg Dean emphasizing a library-like office that promotes deep thinking and minimizes distractions.
A Langdon Compounder is a business that demonstrates high ROIC and sustained growth, prioritizing the quality of the management team for long-term success.
Langdon focuses on investing in smaller companies with enterprise values between $500 million and $5 billion, avoiding businesses that outgrow the small cap space, while prioritizing exceptional returns and service to clients.
Deep dives
Greg Dean's Approach to Building an Investment Firm
Greg Dean, the founder and lead investor of Langdon Equity Partners, emphasizes the importance of creating the right environment to foster investment excellence. He shares that the Langdon office is located away from the typical business hub to encourage independent thinking and reduce distractions. Dean wants the office to be more like a library, facilitating deep thinking and discouraging constant action. He also values teamwork and sees the importance of building a culture that supports long-term success.
Greg Dean's Definition of a Langdon Compounder
According to Dean, a Langdon Compounder is a business that exhibits high returns on invested capital (ROIC) and sustains above-average rates of growth in both human and financial capital. He stresses the significance of scalability and the ability to consistently grow the company for decades. Dean believes that smaller companies prioritize people over systems and processes, making the quality of the management team essential for long-term compounder success.
Challenges and Sell Discipline for Small Cap Strategies
Dean acknowledges the challenge of managing compounders that outgrow the small cap space. Langdon focuses on finding companies with enterprise values between $500 million and $5 billion to mitigate this issue. They prefer not to hold businesses that exceed their intended market cap range for small cap investments. Additionally, Dean mentions the importance of recognizing when an investment thesis is incorrect or when the management team does not meet expectations, leading to potential sell decisions. He prioritizes diligently identifying potential impairments and ensuring the team at Langdon remains focused on delivering exceptional returns and service to their clients.
Importance of Being an Active and Engaged Investor
Langdon defines itself as an active and engaged owner of world-class smaller companies. They focus on investing in well-run businesses with admirable management teams that are likely to deliver fantastic results for their clients. They aim to add value to these management teams by offering a global perspective and industry insights. By building relationships and sharing best practices, Langdon believes they can make a positive impact on the companies they invest in.
Building a Durable and All-Weather Investment Firm
Langdon's goal is to deliver Hall of Fame returns and provide world-class service to their clients. They focus on offering investment strategies that are durable and weather-proof, capable of generating strong returns over a reasonable timeframe without taking on excessive risks. They believe in the power of public markets, emphasizing daily liquidity, price certainty, and transparency. Langdon's investment process involves carefully selecting companies with good balance sheets and a track record of performing well even under challenging market conditions. They aim to continue delivering value to their clients and expand their offering to additional strategies within the mid-cap to micro-cap segment.
Today’s episode is the next in our series of profiles of emerging investment firms. In these interviews, we dive deep into the various components of building an investment firm that can compound. Our guest on the show today is Greg Dean, the Founder and Lead of Investor at Toronto-based Langdon Equity Partners. Greg founded Langdon in 2021 after successful stints at Fidelity and Cambridge Global Asset Management. Langdon describes itself as an “active and engaged owner of world class smaller companies.” The firm has assembled concentrated portfolios of companies with enterprise values between $500 million and $5 billion that are cash generative and are run by long-term-oriented executives.
In this conversation, we discuss:
Why Greg wants the Langdon office to be more like a library than a train station;
His definition of a compounder and the unique challenges of managing such companies within small cap strategies;
How Langdon has tried to position itself differently from other small-cap-focused firms;
The kinds of mistakes that prevent companies from realizing their full compounder potential; and
The cultural elements that are most important when building a new investment firm.
Without any further ado, here is my conversation with Greg Dean of Langdon Equity Partners. For more information about Langdon Equity Partners, please visit: https://www.langdonpartners.com/
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All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of SNN or its affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.
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