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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Concentrated global small-cap portfolio suffered 15.7% Q1 decline primarily from AI disruption fears affecting three core holdings despite continued business growth. Manager increased conviction positions during drawdown, viewing current prices as disconnected from fundamentals."
Langdon Global Smaller Companies Portfolio declined 15.7% in Q1 2026, giving back prior outperformance versus the MSCI World Small Cap benchmark. The drawdown was concentrated in four positions, with three companies (Goosehead, Hypoport, SmartCraft) experiencing valuation compression due to perceived AI disruption risk despite continued revenue and earnings growth. The manager emphasizes that current prices appear to assume damage not yet supported by operating evidence, with portfolio companies projected to grow earnings 23% annually versus 12% for broader markets. The firm responded by increasing process intensity through quarterly portfolio reviews, implementing new research infrastructure, and actively reweighting positions during volatility. Key moves included increasing Goosehead and Hypoport to maximum weights while maintaining discipline on SmartCraft, and re-initiating Topicus after a 50% decline. The manager maintains conviction that cash earnings will compound over time and that price-value convergence will ultimately drive returns, viewing current volatility as opportunity rather than permanent impairment.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
The fund operates a concentrated portfolio of 30-35 holdings and names specific companies (Goosehead, Hypoport, SmartCraft, Topicus, Burford) with detailed sizing commentary, including moving key positions to maximum or near-maximum weights. The manager also notes team members have added personal capital, demonstrating skin in the game.
Growth Outlook
The manager is constructive about their specific portfolio companies' fundamentals, projecting 23% annual EPS growth, and expects price and value to eventually converge. However, they acknowledge a challenging, volatile, and cautious overall small-cap market environment driven by rising interest rates and aggressive multiple compression.
Risk Appetite
The manager has shown a willingness to lean into volatility by scaling up their highest-conviction holdings (Goosehead and Hypoport) to maximum weights. However, they remain disciplined by exiting Burford after a thesis-breaking event and keeping software exposures like SmartCraft at minimum weights.
Capital Deployment
The manager is actively deploying capital into existing high-conviction positions (Goosehead and Hypoport) and re-entering Topicus. They also mention avoiding financial leverage, keeping net debt/EBITDA under 1x across the portfolio, which leaves them room to navigate drawdowns.
Forward Guidance
The manager outlines explicit actions, including re-initiating a position in Topicus and adding to maximum weights in GSHD and HYQ.DE. Team members have also personally added capital to the fund.
Language Signal
While acknowledging the uncomfortable drawdown ('significant drawdown', 'disappointed'), the language remains focused on opportunity, compounding, robust earnings growth, and the disconnect between price and intrinsic value.
Perceived Risk
The manager identifies specific market risks, mainly rapid multiple compression driven by 'AI-enabled workflow change' narratives, interest rates, and liquidity. They treat these risks as serious valuation headwinds but fundamentally temporary.
Opportunity Density
The manager views the current drawdown as a source of 'many attractive opportunities in our universe today,' enabling them to upgrade portfolio quality, buy back compounders like Topicus at a 50% discount, and add to other key holdings.
Time Horizon
The manager emphasizes a 'rolling five-year period' target to double cash earnings and explicitly advises clients to trust that the 'stopwatch of compounding' will resolve short-term mark-to-market noise over time.
