‘Invest Like a Local’ – How and Why We Travel

The phrase “invest like a local” is often used when people (us included) describe the importance of understanding the local context of a business or investment. Since Langdon was founded, we have actively challenged this idea, asking whether our team is truly ‘walking the walk’—building local knowledge, developing context, and spending time on the ground.

Travel typically involves spending a week in a region, conducting 20-30 meetings with a mix of existing and potential companies, and then returning home to document and digest the field research. This process is repeated five to seven times per year, depending on the region. We are always very thoughtful about avoiding hotel ballrooms or ‘brokers offices’ given the overly formal behaviour these settings typically lead to. In the past we even rented coworking space for the week so we could see more companies or have a consistent environment to compare across companies.

As the years went by, the question arose: what if we were an actual local? What if there were no takeout meals, but instead cooking and grocery shopping? No hotel in the CBD, but a house in a local suburb? No taxis, but rental cars and public transit?

In 2024, this theory was tested with a 2+ month stay in a suburb of Lyon, chosen for its central location in Western Europe and French-speaking environment. Rather than a week-long visit, I [Greg] moved my family to Lyon for the 2 months in late-May.

The first email to the team contained the following:

“One of the first impressions I had once we settled into our place was how different it is traveling for an extended period, and also not staying in a hotel. The grocery stores for example or how people travel from home to work (bus, train car etc). They give you such a window into what the locals think is important and how they experience a typical day. Perhaps not as relevant for the US, but I suspect we would benefit from doing more ‘extended stays’ in our regions.”

The trip wasn’t without challenges, both in terms of how much was tackled and the unexpected difficulties of intra-European logistics—such as train schedules and the sheer size of the region. Below is a sketch of what was covered, along with a few of the insights gained and how they impacted our business forecasts.

Travel is usually anchored around 1-5 critical or “must-meet” situations, and then density is built out from there. For this trip, the anchors included Yeti, where Isaac requested more detail on their point of sale retail presence across Europe; Euronext, both at its global headquarters in La Defense and the recently integrated Borsa Italia Exchange in Milan; and a visit to the brewery recently acquired by Royal Unibrew in San Giogio di Nogaro, Italy.

Around these anchors, we met about four dozen companies across Switzerland, France, Germany, and Northern Italy, balancing ongoing research on existing companies with new ideas for the team to evaluate in the coming months.

The Yeti work involved touring dozens of retail locations to get a better sense of the brand’s presence across Western Europe. This research confirmed some concerns around their progress in Europe - which was highlighted as a priority several years ago - but also revealed the still untapped potential of the region once their product portfolio is better aligned with local preferences. In other words, that market is not interested in expensive hard coolers, given that ice is not commonly purchased in Europe, nor are 40oz drinking cups. We did revise lower our forward-looking assumptions for Europe, which today represents about 1-2% of the revenues overall.

(above) Yeti points of sale we visited across Germany, France, and Swizerland

We are infinite learners

The key takeaway was ‘you need to try new ideas to know if they will add value to your processes.’ It probably won’t be perfect the first time, or even the 10th time, but not trying is also a decision, one that implies no further improvements are possible. In this line of work, there are always a multitude of ways to improve. The experience provided valuable insights, not only about companies, but also about how we do our work and ways we can structure our time better when we travel.

Others on the team are going to try different versions of this idea. Alex was the first to attempt a “live locally” trip in 2023, when he spent a month abroad in Tokyo and Sydney, staying outside of major CBDs and large hotel chains.

Portfolio Attribution for the Quarter¹

Looking at performance with a regional lens. Stock picking in the U.S. was strong, with CSW Industrials, Goosehead Insurance, and Esquire among the top 5 contributors, increasing 36%, 53%, and 36% respectively. A well-timed investment in a self-storage platform in the UK also performed well, gaining 24% during the quarter. Lastly, recent investment in Japan rose 65% in local currency and nearly 83% when accounting for Yen strength during the same period.

Looking at some examples of investments that did not perform well in the quarter.

Johns Lyng is an Australian-based insurance builder with a growing presence in the U.S.

This recent investment has not been well timed so far. The company reported shortly after our initial investment and faced issues related to catastrophe work in New South Wales coupled with weaker profitability in the U.S. The stock was off 30% in the quarter. We used this opportunity to further deepen our relationship with their organization, as well as reconfirm our understanding of the value drivers of the business. We met them in Melbourne and New York last month. Other portfolio detractors include Medpace and Fever Tree, both down 20% over the period.

Company Highlight: Esker

Esker is a French software company and one of our portfolio holdings. The business provides midto- large enterprises’ finance departments with highly sticky software the digitizes business logic and automates workflows in areas of order-to-cash and source-to-pay. Notable customers include NVIDIA, Dairy Queen, Heineken, and the Trudeau International Airport.

On September 18th, Esker Management announced a cash offer together with private equity firms Bridgepoint and General Atlantic. The €262 per share bid implies a valuation of 7.2x 2024 EV/Sales and 67.6x EV/EBIT, after expensing capitalized R&D which is roughly 2x on our cost and a 61% IRR.²

The company had been on our watchlist from Langdon’s inception, and while SNCF strikes prevented us from visiting Esker’s HQ during our 2022 trip to France, it did not stop us from organizing a three-hour demo of their solutions upon our return. This gave us a clear sense of the value-add and future growth prospects. We made our first investment in July 2023 after several months of diligence, and increased our weight in November, after gaining conviction in their ability to improve margins without sacrificing growth. This healthy tension between profitability and growth is even more pronounced for a company like Esker, given the length of sales cycles, lower implementation margins, and upfront sales bonuses.

While the company continued to experience record bookings, management grew increasingly frustrated with the market’s underappreciation of their success. To paraphrase the COO Emmanuel Olivier, they were drinking champagne to celebrate record contracts signed, while the market was concerned with the upfront costs it required.3 With new owners, Esker’s Management believes they can focus on longer-term value creation. While Esker has delivered a solid return for clients, we regard it as only a satisfactory outcome relative to the time invested. We believe the company could have exceeded Bridgepoint’s offer through compounded earnings growth over a 3–5-year horizon. On the other hand, there is no shortage of high-quality ideas we think we can redeploy our proceeds into if the deal goes through.

Capital Flows to Mispriced Opportunities

We remain confident that our disciplined investment approach—combining thorough deskwork with on-the-ground research, as highlighted earlier—has positioned our investors well for attractive long-term returns. Even in an uncertain world, capital flows to opportunities like Esker, even if they are not fully recognized by public markets. When the compounding process is interrupted by opportunistic private capital, we believe that our approach will continue to uncover compelling opportunities across our large and fertile investment universe.

‍

‍

‍