The market screams hot stocks. Great investors stick to the process

The hottest stocks in the world right now are tied to AI.

Suddenly, before so many of us knew it, a collection of businesses including Micron, Samsung and SK Hynix hit trillion-dollar valuations. The sector is in a frenzy, and it makes it difficult for even the most disciplined investor to resist chasing momentum.

But that's exactly what Greg Dean has developed the skin to avoid.

The Chief Executive of Langdon Partners has spent more than two decades navigating market booms, busts and investment manias. His philosophy is simple: ignore the noise, focus on the business, and let the process do the heavy lifting.

"Themes are for theme parks," he says.

Rather than chasing whatever is working today, he's looking for businesses where the fundamentals are improving while the market is looking the other way.

What happened in the business?

One of the more unusual things Dean has done is ask Bloomberg to invert the colours on his terminal. Stocks that rise appear red. Stocks that fall appear green.

Strange as it sounds, the rationale makes sense given the discipline he tries to bring to his process.

"You need to live in this narrow emotional band when you're making decisions because we're all victims of hubris, ego, confidence, anxiety and stress," Dean says.

When a stock falls 20% or 30%, Dean says the first question should never be whether the share price looks attractive. Instead, investors should ask one thing:

"What happened in the business? We're trying to train people to separate the business from the stock. Those are not the same thing."

Sometimes a falling share price is telling you something important. Other times, it simply reflects a market that has become distracted by a new narrative. An investor's job is figuring out which is which.

Why Langdon doesn't use screens

Many global investors begin with quantitative screens. Langdon doesn't.

"We don't run screens on valuation, we don't run screens on growth rates, and we also don't go to conferences."

Instead, the team spends its time building knowledge.

Each year Langdon meets around 250 companies, despite knowing only a handful will ever make it into the portfolio. The objective isn't to find a stock to buy tomorrow. It's to build a long-term understanding of a business, industry and management team.

Dean describes it as "building a file."

A company that isn't attractive today may become attractive three or five years from now. When that happens, Langdon already knows where to start.

"We're beginning to build a relationship and a knowledge base about a business and a team."

Who runs the show?

When Dean meets management for the first time, one question almost always comes up.

"Whose company is this?"

Then he waits. The answer, and often the silence that follows, can reveal more than a spreadsheet ever will.

Before Langdon worries about earnings forecasts or valuation multiples, it wants to understand who is actually making decisions. Is it the board? A retired founder? One bombastic individual?

Equally important is ownership - management needs to have meaningful skin in the game and a culture capable of lasting beyond any one person.

The perils of predicting the next hot niche

Despite the headline-grabbing rise of AI, Dean has little interest in constructing portfolios around themes.

That doesn't mean he dismisses them. In fact, he describes AI as one of the largest capital expenditure cycles of his career.

What he questions is whether investors are focusing on the right part of the story.

"I believe in AI, but I question the capital chasing the supply chain."

Dean draws parallels with the China boom of the 2000s, when investors piled into one commodity after another, each seemingly backed by an irresistible structural growth story. Yet as more capital chased those opportunities, new capacity entered the market, competitors emerged and excess returns eventually came under pressure.

AI investors face a similar challenge today.

And the hardest part is whether companies and investors can successfully "swing from one vine to the other" as the economics move through the value chain without eventually falling off.

"We have the humility to admit when we don't know something."

3 stocks Langdon likes today

Rather than trying to forecast the winners of every technology cycle, Langdon focuses on finding a relatively small number of businesses it understands deeply, including some that have become collateral damage in the market's rush towards AI.

Out of roughly 3,000 companies across developed markets, Dean only needs to find a few dozen opportunities capable of doubling over five years. Here are three he likes right now.

1. Euronext (EPA: ENX)

Dean's first idea is Euronext, the pan-European exchange operator that has spent the past decade transforming itself from a collection of national exchanges into a broader market infrastructure business.

Today, the company owns exchanges across multiple European countries and has expanded into adjacent services such as clearing and settlement, creating what Dean sees as a stronger and more diversified business than many investors appreciate.

"This is a company that has what we think is a really high-calibre management team that's proven to be good at doing deals and proven to be good at organic growth," Dean says.

That combination is rare.

Dean also points to the recent appointment of Anthony Attia, one of Euronext's most senior executives, as the incoming CEO of ASX Ltd as evidence of the quality of the organisation's leadership bench.

#2. Goosehead Insurance (NASDAQ: GSHD)

If Euronext represents quality, then Goosehead Insurance represents dislocation.

The stock has fallen roughly 60% as investors worry AI could eventually disrupt personal insurance distribution. Dean disagrees.

The company continues to grow organically, has never made an acquisition, and remains led by a founder with significant ownership.

"Their goal is to be the largest broker of insurance in the US in the founder's lifetime ... we think it's an unbelievable buying opportunity."

His view is that insurance remains a relationship-driven industry where complexity still requires human advice, particularly for households with multiple policies and specialised coverage needs.

#3. Johns Lyng (delisted)

Dean's final idea is Johns Lyng Group, which Langdon recently re-entered following its takeover by Pacific Equity Partners. The firm now owns a private stake in the business after participating alongside the buyout group.

The firm had followed the company for years and believed public markets were placing too much emphasis on short-term swings in catastrophe-related earnings.

"The stock's been a bit of a casino in the listed market. Far more volatile than the underlying business."

Dean argues the market became overly focused on the unpredictable timing of floods, storms and insurance events, rather than the quality of the underlying restoration platform.

That conviction ultimately led Langdon to reinvest alongside the private equity buyers, with Dean believing the business could potentially double or triple in value over the next five years.