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Langdon Canadian Smaller Companies Portfolio Q1 2026 Investor Update
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Dear Partners,
The Canadian Smaller Companies Fund declined 1.5% in the first quarter of 2026, compared to a 7.3% increase for the benchmark.
Langdon Canadian Smaller Companies Portfolio
Over the past several quarters, we have discussed how the Canadian market has been driven largely by gold-related equities, with that narrative continuing to influence returns. We have also outlined why the core tenets of Langdon’s approach lead us away from businesses where revenues are primarily dependent on inputs outside of management’s control.
What we have not emphasized and what is worth highlighting is the common thread between what gold investors seek and what we seek at Langdon: scarcity.
For gold investors, scarcity is straightforward. It is rooted in the finite supply of the underlying asset.
At Langdon, we think about scarcity differently.
We look for businesses where scarcity is reflected in a combination of characteristics that are difficult to replicate:
- Resilient and compounding free cash flow
- Strong balance sheets
- Talented and aligned management teams
- Attractive valuations relative to intrinsic value
Individually, these attributes are not rare. In combination, they are.
In our view, it is this combination that allows businesses to adapt, evolve, and compound value over time.
Portfolio Attribution
Performance during the quarter was driven by the following key contributors and detractors across the portfolio.
Leading contributors included:
- PrairieSky Royalty Ltd. — a royalty business generating revenue from oil and gas production without direct operating exposure
- Logan Energy Corp. — a growing platform focused on Western Canadian oil and gas development
- EQB Inc. — a challenger bank continuing to scale deposits and lending through its digital platform
Detractors included:
- TerraVest Industries Inc. — a diversified industrial business serving energy and infrastructure markets
- Definity Financial Corporation — a P&C insurer focused on disciplined underwriting and long-term book value growth
In the case of the detractors, short-term share price movements diverged to varying degrees from underlying business performance. Our focus remains on the latter.
Company Commentary – Prairesky Royalty LTD.
PrairieSky Royalty Ltd. embodies the core tenets of scarcity that we believe underpin successful long-term investing. Our history with this company (slightly) predates its 2014 IPO. We wanted to get more time with the very talented CEO before the 100+ meeting roadshow, so we arranged to meet for coffee at the Starbucks on Yonge and King just before the day started at 7 am. Sometimes, very unique leadership teams and assets require very unique access.
The company owns one of the largest portfolios of fee simple mineral title in Canada. Unlike traditional energy companies, PrairieSky does not operate wells or spend money drilling, completing or tying in wells. Instead, it collects royalties on production from third-party operators across its land base.
This model results in a business with high margins and resilient free cash flow. Because PrairieSky does not bear the capital costs of drilling and is not exposed to operational execution risk, its economics are structurally different from those of traditional producers.
The strength of the business is rooted in its low capital intensity. With no requirement to fund development activity, PrairieSky maintains flexibility through cycles while preserving the ability to allocate capital toward acquiring additional royalty interests.
Management’s role is not to operate assets, but to allocate capital and manage the asset base with discipline. Over time, outcomes are driven by decisions around royalty structures, acquisitions, and the stewardship of a finite resource.
The asset base itself is difficult to replicate. PrairieSky’s land position has been assembled over decades and represents a finite resource with perpetual ownership, providing long duration exposure to production without requiring ongoing capital investment.
Importantly, the business benefits from industry activity without requiring capital, a combination that is difficult to replicate. We have already earned a handsome return on our investment with this company, but we felt that coming into 2025, the liquids growth and corresponding cash flows were not being appreciated by the market, so we decided to add to our investment, and it’s now the largest holding in the fund.
In our view, PrairieSky reflects the type of business we seek to own: one where resilient cash flows, capital efficiency, and disciplined capital allocation support long-term compounding of free cash flow per share.
Looking Ahead
Periods like the past quarter are frustrating. They are also part of the price of investing with discipline.
We do not build the portfolio around forecasts of commodity prices, interest rates, or macroeconomic outcomes. Our returns do not depend on getting those calls right.
Instead, we focus on owning a concentrated group of businesses that can compound free cash flow per share over long periods, with strong balance sheets and management teams we trust to allocate capital well.
That will sometimes lead to periods of divergence, particularly when markets reward a narrow set of exposures. We are comfortable with that. It is a feature of a differentiated approach, not a flaw. At quarter-end, amid all the volatility and narratives, we sit right around our targeted return since inception of 15% and are very comfortable with the risk we have taken to deliver it.
Our process remains unchanged. We continue to do what we have always done: concentrate capital behind high-quality businesses and let time work in our favour.
Greg Dean, Founder and Lead Investor
References
- Performance as at December 31, 2025. Returns greater than one year are annualized. Past performance is not indicative of future performance. Please see the important information in the endnote below.
- Since inception date of August 26, 2022.
- LEP110 (Class F) – performance is net of fees.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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