Compounding Without Ego with Jean Philippe Tissot, Founder & Fund Manager at Arauca Capital
Summary
In this episode of the Planet MicroCap Podcast, I spoke with Jean Philippe Tissot, Founder and Fund Manager at Arauca Capital, …
Transcript
Welcome to the Planet Micro Cap podcast, the number one destination for everything micro cap investing. I'm your host, Robert Craft, and each week I sit down with elite investors, CEOs, and market experts to uncover actionable insights and real world lessons you can apply immediately. Are you a new or experienced micro cap investor? Do you want to meet Microcap management teams as well as other micro cap investors from around the world? Planet Microap hosts the highest quality in-person micro cap events in North America. The mission is to bring the best micro cap investors, companies, and allocators together to gather, connect, and grow. Visit planetmicrocap.com to learn more about our Las Vegas and Toronto events. Now, a quick disclaimer. This presentation is forformational purposes only and should not be construed as a recommendation to purchase or sell any security referenced herein. Planet Microap holdings LLC and MicroAP Club LLC are not licensed brokers nor registered investment advisors. We our partners, contractors, members, subscribers, guests, or affiliates may or may not hold positions in one or more of the securities mentioned in this presentation and may trade in such securities at any time. We may have received cash compensation for one or more participants for presenting at past, present, or future events. We recommend you consult a licensed investment adviser, broker, or legal counsel before purchasing or selling any securities referenced in this presentation. In this episode of the Planet Micro Cap podcast, I spoke with Jean Phipe Tiso, founder and fund manager at Aroka Capital to dig into his behavioral framework for investing and why he believes managing your psychology is the real edge in micro cap markets, not finding the next great setup. We break down how his tolerance for hairiness shifts depending on position size and company stage. Why an investment thesis or hypothesis tends to break slowly at first like human relationships as facts shift on things that already bother him until additional issues combined to make selling an easy decision and his deep dive into Softwave, a non-invasive aesthetics device company. The symbol is Sofw on the Tel Aviv Stock Exchange. Jean actually will be hosting a fireside Q&A with Softwave Management at our event in Las Vegas. We mentioned several companies and sectors during this conversation and I'm not a shareholder in any of them. And with that, please enjoy my conversation with Jean Phipe Tiso. Jean Phipe or JP. I might go back and forth depending on the the mood. >> For you, of course. >> Thanks for joining me, man. How you doing? >> Yeah, great. Happy to be back with you in a few years on this. But so no, doing great. Hope you guys too also there, huh? >> Absolutely, man. We're you know, listen, last time we saw each other, I think we were having a few drinks um at the rooftop in in Idaho. Man, that was fun. That was fun. Who's hanging with us? What was his name again? Was it was his name Fernando or something? He was from Mexico. >> Rodrigo Rodrigo Rodrigo. That's a right there. >> Rodrigo. Yeah, that was that was that was a good time, man. We listen, we're still we still need to go down and and and hang at one of his restaurants, you know. That was that was awesome. >> Absolutely. That was that was really fun. Wonderful conference, you know. So, >> yes, you know, there you go. Like, you know, you go to a conference, you end up hanging out for a few hours and we just uh you know, listen, Jean Phipe was on one, so maybe I understood every fourth word he said, but we're going to do okay tonight or tonight. Tonight, your time. Well, Jean Philipe, I invited you back on because hey, look, man, it's been a few years since you had since we had you on the podcast. We're talking about all sorts of some great stuff. And, you know, I thought I'd invite you back on to, you know, one to do kind of a call back and talk through, you know, how things have changed, your investing style, all that all that good stuff. And then also, you have a a company to uh talk through with us here today. So, and for those who are tuning in expecting us to, you know, do a deep dive on, you know, all the stuff he's talked about on social media, we'll probably address it at the end a little bit, but, you know, we're gonna we're going to dig into some other stuff. >> Pandora boxes. >> Yeah, >> we're going to dig into some other stuff first. Okay. So, uh you know, Jean Felipe, to kick us off, you know, last time we spoke, uh you know, here we go. We're gonna get you get you right away here. So uh last time we spoke you framed investing around behavior, market math and real world experience. H how has your waiting of those pillars changed uh today? >> Uh not at all. I mean it's it's even more important the behavior than anything else you know. So um investing um you know like doesn't have a lot of barriers of entry but it has a very high barriers to su to succeed. And behavior is the part that is not really talked and what really kills the smart people is bad behavior you know. So a lot of laziness could be also uh killing a lot of investors. But the pillars are key and are really not changing. Actually the more I see the world of investing the more I see how important they are. So that's fundamental. Without these pillars I wouldn't be here I tell you. Huh. No, absolutely. I mean, anything specifically within those pillars in terms of, you know, behavior or or actual real world experience, look, it's been four years since we've uh chatted. A lot has changed. I mean, is there anything within those things where okay, in general, yes, those things are all important and and those pillars are going to continue to focus on them when, you know, looking at potential new ideas or, you know, digging into, you know, current ideas. Is there anything within that maybe maybe behavior-wise? Has anything changed the last few years? >> Think about think about when you are in investing where you are interested the most is just to be as closer to the reality of how the world evolves and for that you need to have a good synchronization with what's happening. So if you take all the facts with an assumption that you are never correct but you're just exploring you know you are not egocentric that because I have a position here I need to defend it until the end of my life uh or because oh I sold I want uh short then the whole thing is going to be the end of the world. You can see the the world like an onion that when you have a hypothesis of things and as facts evolved you just need to you are closer to the reality but only if you behave properly. If you are too personalizing yourself with a position uh you know like you end up like defending not seeing what can happen not seeing uh when there are signals that can make you change. Um that also is when you are very excited with a position. You know there are many times that we have situations that are oh valuation is great management up to the point is great uh everything is but facts change relationships change in life with your girlfriends uh wives whatever you know so it's very important to be neutral on that and that's behavior that's behavior you know so behavior is king you know it's absolutely king so you you really want to be this as dispassionate as you can take everything and assumption that you are kind of wrong to prove it. So every time I have a position, I want to hear the other side of voices, especially if it's people I can respect and they have really like um good arguments to make me probably realize that I'm wrong. The real thing on investing is to minimize the losses, you know. So big gains with big losses don't take you anywhere. So the earlier you identify that you can be wrong, the better for you, you know, and that can only happen with a proper behavior. It's very easy to say. It's extremely hard to know it. Just look at uh the world around. So you know, I have to ask you because you know I we've hung out a couple times and like you know you're like one of the most impassionate people I know. When you're getting when you're on one like you're you you let me know. How hard is that for you? you know, and it just personally like we can speak in generalities of like, all right, we got to make neutral new new news. I got to make sure, you know, make sure I stay level-headed so that I make, you know, the best decision for for uh for just make the best decision once the new news come in. But for you personally, I mean, listen, I'm a passionate dude as well. Like I I it's it's tough sometimes when you see new you're like or you know you know like how how for you >> what is the hard part when facts change against your hypothesis or when because there are many things that can make you >> a little bit you know like in >> I'd say that I'd say that on both the positive and negative side >> um for me now I'm much more relaxed with that you know for me I don't get merit with any position. Today we can talk about Subway. I love it. My biggest position today, tomorrow I can sell if the facts change and absolutely I don't care you know absolutely not trust for me you know like the more people it's very like not intuitive but you should be much less tolerant to sloppiness with the higher positions in your portfolio what with the beginning ones. So if you have things that are annoying you at a 3% position and the things don't uh get better over time then you should exit in an easier way you know but you should not just let compound things that annoy you. If that thing doesn't annoy you, that's fine. But to me, if something is bothering me for a while, I try to help. If it's not potentially happening or I don't have any connection with the company, it's just very easy for me to set like it's very easy. Now, what is difficult is when I lose trust with management, you know, it's like, oh [ __ ] you know, sorry. It's like, oh, I thought about this. And it has happened a lot of times. I've been doing that for 13 years now, you know. So I can tell you every two years probably my complete perception of a particular member of a management team of one of the top five companies I have every two years maybe changes my perception. There's one, two, three elements that I said this is not what I wanted. And for me it's like I'm not married with any. I mean remember our common friend Ardam. He says friendly with management but no friends. So it's absolutely true and that's exactly how it should be. It should be it should be use of for me. It's not not not an issue for me. What I really care is about compounding the capital. I have investors. I have my majority of my net worth is in my fund. So I'm not really looking to be right, you know. I want to compound. If tomorrow I'm wrong on a position is fine. And also facts change. So we you you can have a lot of uh aspects that you are wrong. One is because you were actually wrong. Like the company was really bad. You thought it was good. you misread the trends of the industry, the market, but another things are really surprises like really something completely a war somewhere that can change the whole hypothesis that you had and you need to move on. So you need to be agile and you have to have flexibility in your mind. You know if you don't have that this doesn't take you anywhere you know like over the long time here we have you can be lucky for a long periods of time for one year one but for over long periods of time luck re is gone because you need to make constant repetitive good decisions you know it's like you can become rich by luck but you cannot remain rich by being luck you know so it's it's the point so when you know these are the rules of the market of of compounding you you know what you need to focus in something else by the way for behavior I actually something I forgot I'm extremely more disciplined on my um environment so I narrow down the people I talk I narrow down the different environments that I think are not adding value to me um enormously and life is short there's a lot of fun I'm having with this is not easy and you know You need to deal with people who make you better you know and you don't know many and this happens very easily maybe I realize that X was different than Y then you know I need to improve my and then remove some connections and see some aspects that's part of the game look Buffett how he he he he he he has done it over his entire life is by really focusing on a on an environment and and I think it's is the more I have done this job the more I realize how important is >> see I knew that yeah see we took the next step and you told you you have gotten more disciplined in in our old age here you know but one other question I had you mentioned you know not being as tolerant of the the sloppiness but you know look I say you say sloppiness I I you say sloppiness I say hairiness you know uh >> and you know dealing in micro caps you know for the most part most setups are you know there's some hairiness to it but that's what also ultimately is the opportunity because that's why most of the market probably ignored it. And from your perspective, how much tolerance do you have for toariness or is there only is there certain types of things that you're more tolerant over than others? Let's say >> that doesn't have an absolute answer that all depends on the stage. >> Oh, no. It's a great podcast question. That's why >> absolutely great podcast question. That depends on the stage of the company, right? So if you have a company which is you know like kind of a startup starting a few years ago they are proving themselves there is a lot of sloppiness that you can tolerate you know you can say I put one two maybe two and a half% of the portfolio here but this is high risk so you don't have margin safety but the margin of safety you do it with a low size position you can be wrong and if you are wrong at a zero then you lose 2%. there's not the end of the world you know so then you can be more tolerant however as probably the company executes well maybe also some luck and the company becomes a two bagger three bagger whatever it's a 10% position now the my tolerance decreases and now it's a 100 million company and it will and now it's a whatever 1 billion you know you know that now you need to say okay now it's a bigger portion of my portfolio so the risk is is is higher on my side Um and you know that and this is something that is not intuitive. I don't see this discourse happening. But what you need to think is like what it took a company from 100 million to a billion. It's not going to be the same 1 billion to 10 billion. Look how companies evolve. You know micro caps most of don't make it. It's very very rare that a micro cap makes. Some of them make it extraordinary. The majority of companies are medical business. There is a lot of um statistics about it. I don't need to name it. That's part of pillar two understanding the market. So but you want to say to say oh maybe this is one of these exceptions that is going to compound forever but for that they really need to improve in all aspects you know so otherwise it's easy that you know they can remain there forever or they can go back so my tolerance depends on the stage of the company it is you know so but it you can say the rule is the bigger it becomes in my portfolio the more prominent the company becomes the better, the more professional, the more superb in all aspects of the company they need to be, you know. >> Absolutely. So my final question before we get into, you know, into talking a little bit more about soft wave, which you mentioned earlier, >> we you've emphasized min minimizing permanent loss over volatility. You know, that that's one that's what you said in our previous thing. made that very evidently clear already in our first you know 10 minutes here chatting. Has anything recently challenge that principle in practice would you say? No well all the time you are challenged permanently with this you know so because you have let's say as an investor you always deal with two more things but mainly two aspects one are the intrinsic situations of your companies and the other ones are the macro situations you know so micro situations we we we have the worst we have whatever happens that probably if something really really really bad happens this could be a cataclysmic for markets and all Um on the same on the other hand in the companies some if something changes and you are not aware of it and you're not paying attention something really bad can happen on on your own intrinsic part of your portfolio. So you are constantly with that you know and also one one key risk is that if you become too directional on micro situations for instance uh in the Iran thing I said the risk of something like the Iranians destroy the oil infrastructures for instance of the Gulf nations is probably 5% but if it happens it's cataclysmic but that forces me to be in a way or having some options put options somewhere just being like if that happens is not the end of the world for me. But at the same time, getting directional and believing that's the direction that is going to happen can destroy you because you become too paranoid and then you don't invest and you just like oh probably exit a company. So and that is also a loss you know. So then it's a permanent between. So why I'm really crazy is that when there are factors that are intrinsic in the company that really really I cannot tolerate more I exit and move on you know I mean over my 12 13 years with this one doing it is insane. I have company being the top number one that I sell within one day or two days has happened all the time can I mean MGP but with many many many companies that's part of the game you know so it could be one thing that I heard from management it could be like you know the thesis was the hypothesis was playing differently because of some metrics that I I I I really follow so this is part of of of of an ongoing basis and you are constantly challenged and you need to be to be ready to to always act let's say in the most prudent manner. Huh? >> I speaking of that I mean you know cuz some people might hear that. I'm hearing it and I'm thinking okay if like what like what is the the weight of the facts that change right? like is it something small that you're like all right that's not that big a deal or is it you know or or even if you think it might if it's small like oh the facts changed I'm out or is it something where you're like whoa all right that obviously if it's something you know in your opinion that's very material you're like all right well facts have changed here for sure you know you know what I'm talking about >> absolutely I tell you I tell you I try to make an analogy >> um before you got married you had many girlfriends I guess right so it's a similar story so when you are with somebody um it's very rare that you go and say let's say before we got married and all of that so that you go one day and say oh the facts change you know I'm break up with you tomorrow so small things oh you know one the other here I don't trust here this aspect is you guys need to prove it here but that guys don't uh market is performing on that and then what is one metric you follow in combination of probably a year of announce or three months of announce or something that announce annoying you um and then you just decide finish the story at the same time volatility brings information in markets in people in everything so when there are aspects where so that's why when everything works well everybody's happy friends or or party on but when things are starting to get confrontational but in a nice way. Oh guy. So when people management teams or different aspects or guys this aspect needs to be improved what happens with that or and then you see how they don't want you to ask these questions or they don't want you to follow on this and then the trust starts to why you know and when trust starts to shift and that's also a big part you know I mean many cases many many cases of when management tells you this is going to happen how many like look I'm in in 2020 or these years all the management teams of tons of micro caps promising like everything they're going to do promise and then very few deliver what they were doing completely you know and delivering is a very subjective word because delivering is revenues is revenues and cash is all so it depends so it is um it is a whole combination of factors that play into role you Huh? >> 100%. >> One day that comes >> that day be something you were annoyed before you were military tracking. The the thing is like if you actually you know you are never fully happy with things you know but there are things that they need to be improved over time. If they actually deteriorate or management tells you BS on something or you know that they try to disguise things whatever you know you know that cash flow is negative but the because and then they show you that is super positive because they they don't tell you that this aspect is is is making it positive but it's not this is how they lose me you know you know or when they say by December we do that look what happened in with mono precise back in 2020 or 21 when management promised everything in the world and then nothing happened but they didn't even come that they didn't do deliver what they said and that's how they lose me so I I I lose trust and slowly and then suddenly but it's never suddenly one the decision is easy uh you know it's like but it's it's like the relationships >> yeah I very much appreciate that so all right Jean Phipe JP we're finally there. You know, uh you had an idea that you wanted to uh you know, talk through a little bit here and uh you know, I might serve up some questions. I also might just let you run, you know, because >> why not? Come on. >> Yeah. You know, look, so you know, Jean Phipe, talk to me, you know, uh Softwave, you know what? Why is it why is this idea interesting to you? Why why this idea and why now? Well, first disclosure, no recommendation and all of that and I'm not going to I'm if I change my mind, I sell immediately. Okay. >> Uh this is a company I hold already for a while. So multibagger for the fund is the biggest position now. Um is just being um or the company's executing extraordinary um even better than I expected actually a lot better than I expected in all fronts which is rare. I don't know if it's going to continue doing that, but it's done until today, you know. So that's why the story they reported yesterday actually. So it's a lot of new data. I know like I made probably mixed numbers up. So but um so that is just a pramulous uh but then yeah so you you you can start asking or shall I introduce the company or whatever you say. >> Let's dig in. tell us uh you know tell us a little bit you know what that what do they do uh and and as well as you know why just ba your basic your basic thesis around software >> yeah sure so just trades on the television stock exchange soon and going to be listed in the US they're already working on that is around 600 million market cap it's um a utilit utilization platform company which I'm going to for that later. But they operate in the noninvas invasive uh aesthetic device industry, right? So what they basically do, they try to make you look younger and better. So they with your own look they try to rejuvenate the skin um in it started in the face and now it all goes to the body with a new applicator they have and they are doing by actually identifying the pain points of all the legacy device companies today. uh because this company is founded by the creators of the industry which is something really interesting. So that is just small what they do. Um we're can we can speak in in detail. Um but if you want I can I can mention a little bit something about the founders management uh which is key. So yeah, when we talk about the aesthetic device industry, we need to talk about um Shimon Ehouse, you know, which is he's basically the godfire of the industry, right? So he invented IPL, which is a technology um which is the technology that pretty much was after lasers um that's intense pulse light. That was in the 19s and that was where you know lasers um operate with one wavelength uh intense pulse light was a broader spectrum so it was more effective and he created a company called Lummenis the IPO multi-billion company uh he started bringing well there were a lot of people in Lummenis that are part of um software today he eventually made an acquisition uh I think the company was lesser industries I don't remember exactly but that was not a good one and the stock went down. He eventually left Lummenus um with a proxified and all of that and he founded another company right after called Sinon where he invented another technology which they invented Ellos which is a combination between light and radio frequency. Riore frequency is creating energy with electricity. Simple as that, you know. And that was was even better than than than the previous um just IPL technology. So after so they sold it to Apex to a private equity company. The the company is still somehow part of it. I don't know if they lost the name but these two companies remain in a way. um not exactly in the same uh nature but later on he find or he founded software not only alone but with the best people of the industry. So he the CEO of um of software today is a guy called Luis Cafiori. was the CEO of Sinon, okay? And he was a guy who was a expert on scaling the business. And you will know why that's so important in a second. The the whole another guy is called Ariel um is Verdict, which is the CTO of Sowell. This guy was the inventor of a machine called ultra shade which with ultrasound technology um they kill fat cells and that's important for today because when you are trying to rejuvenate the skin you don't want to kill fat cells so it's important to know and this this guy sold ultra shape to syno you know so you have all these people who know exactly where they are doing and all together in subway why is that is important because it's the risk execution What does it mean? Just a few months ago, last year, so we got approval to sell in Japan. Okay. So, what does it mean for Luis Cafiori going to Japan and tell the distributors? Probably he's talking to one of the guys he made rich like 20 years ago with Cynisk execution by the godfathers of the industry. So, it's very very very serious. These guys know exactly what they are doing. They know the context and identified all the pain points of the legacy technologies and created software which covers them all. We are going to kind of explain later on the differences between some of the other technologies and software but that's let's say management today you know. >> Absolutely. So let's dig into the actual device itself, the the equipment that they're selling to clinics and what what would you say makes it unique and different compared to what has is also available some of their competitors you know why are they why are they you know in theory winning business over them or or give us give us more give us more >> um I need to bring a little bit before that to understand what it is >> our skin when we age The problem with our skin is very simple. We lose the collagen um structure and the elastin. Collagen we don't produce easily and elastin actually we don't produce a saddles at all. So what you need to create uh is a an injury on the skin that the injury itself wakes up one cell called the fibroblasts that is producing elastin and collagen uh collagen and that injury is created by these legacy devices and by software as well with a thermal heat with heat with heat. So it's a thermal injury. So that's what you need to do. So all these machines whatever the technology behind they need to harm your skin you know at some point and they need to wake up these fibroblasts so that you it wakes and produces collagen analog. By the way when these fibroblast they get lazy they they lose the grasp to the the structure of the collagen they fall down and actually they start creating some enzymes that ensure that more collagen get destroyed. So that's why you age very fast. So that is how it works. Everybody needs to do that. So you create energy, you have a heat somehow. So laser is with light. Laser problem. What is the laser problem? That light targets pigments. So when you have dark skin, you get a burn mark. And this is the problem of laser years, 20 years on that. Laser also burns your skin because the epidermis which is the path here it gets completely burned. So that's not good. Another technology is radio frequency. Radio frequency is operate let's say the most known company of radio frequency. Well we actually have two. One is thermwich. Thermage is a very good company. It's owned by Sulta and they are doing very well in in Asia particularly. uh they have a problem because the energy um that it passes it it infers with how hydrotated you are right so if you drunk a lot of water um the electricity flows easy but if you didn't drink a lot of water during the day it doesn't feel so you don't know where at which depth is going to hit you in your skin and these fibroblast leaving the 1.5 ml around. This is like the reticular nerves. If it's too deep, you can destroy nerves, motor nerves, and then you don't move or fat cells. You know, you don't want to lose fat cells you have. So that's one aspect. Then you have in mode. Well, in mode is radio frequency, but with needles, so you actually penetrate your skin, you have a lot of downtime with this, you know, wicks, you become a waffen. This is very painful you know so it's is it's is very bad um I mean in modem mode is is now it had 6% growth reporting today or something like that last year 6% down and the previous year 20% down you know so frequency with NOS is pretty much obsolete now and then you have there are more companies but these are the main ones altera has um ultrasound which the difference is hyperfocus so it's some single point that hits you and it hits you very painful. They are effective but very very painful and they have different transducers and different depths. So what happened? They have one of 4.5 mm that's the risky area you know in that part you have um you have well the nerves and and the and the fat cells. So that could have a very problem. So you have you know like safety risks, you have pain risks, you have downtime and in subway you don't have that. So Soapway operates with ultrasound energy you know that's mechanical energy. So it doesn't have problems with light it doesn't have problems with water or resistance um it goes directly it covers compared to it covers a broader spectrum. So ultraa will cover around 5% of the tissue of the point um softway because it's a you know it's a flat area like a synchronous cylinders they have seven cylinders um it covers around 35% so it covers a lot more spectrum it only goes to 1.5 milll so it doesn't risk at all to penetrate the subcutaneous part you don't have downtime you do have a little pain not at all like the other ones you don't have downtime you can have it in your you know like for example a launch and you can go back to work. Um so it covers all the pain and safety problems compared to the others. >> Got it. All right. So I mean let's talk let's talk a little market penetration here. You know how >> you know you clearly made the case for why you know it they have I guess you'd say a you know a better potential solution here. you know how how much have they how much of the market have they actually penetrated where are they currently selling the uh the device and also I mean this is a highly crowded space you know how the part two of that question is how difficult has it been for the actual adoption in the clinics for them to say all right we'll start using this versus maybe what we previously had done >> well you can I can just share with you um the the growth of these guy these guys I mentioned. So la last night or yesterday uh so reported 46% growth on Q1 which is the weakest quarter. Last year was 46% as well in the entire year. Q4 the highest quarter was around 58% growth and I told you in mode was declining in 2024 20%. Last year they declined 6%. Just now Q1 was barely positive but still below two years ago. Altera uh is private uh but they grow because you could see the LinkedIn post of the CEO so they grow around 20%. Um the whole company isa is the one that is listed they are grow also 20% very strong very strong in Asia um so these companies are doing some of them uh like and the are still doing well um in mode is doing really bad software is doing extraordinarily well what it's telling you is that and the most important metric that you need to always look at it is that the consumable part which is a key element. So you sell the device you know the device cost around 100k 65% profit margin call it that's not the real business the real business is the consumable okay so the consumable is something where it tells you whether people are happy with it they didn't feel a lot of pain they don't want to touch it again or they have some risky safety measures they don't want to touch it again the consumable part the recurring revenue part on software reach 45% yesterday. This is of total revenues. So this is huge. In Q4 it grew 83% or 86% 80 something%. This tells you that the the the the the service or what the people feel is very good. You know it's having results. It's not that painful because people are coming back more than any other. The consumable is very important to know because as I said that these founders uh identify all the pain points. It's not the pain points on the patient itself but the pain points also for the pract for for the dermatology. So for medba companies who acquired the the the machine the the recurring revenue is very key. Software ala the physical components you know in subway are pulses. You buy them with Wi-Fi, download it in your machine, use them, boom. So inventory zero, no need of logistics, no need of working capital, no risk that you don't have the inventory as somebody comes and you cannot do it. It's delegable when you are within mode. You need to do it by a doctor. You cannot penetrate some skin in some way. You can have an assistant and the doctor can focus on a 20,000 surgery lift. So it completely changes in all aspects of the company, the the industry, you know. >> Yeah. So Jean Phipe, this is this is a question that I'm borrowing from uh my my buddy Andrew Walker over at uh over at Yet Another Value Podcast. It's probably my favorite question that he asks anybody that comes on. So, uh, Andrew, shout out this full credit for this question, but I think it's appropriate because I think it will help us hone in on, you know, the the real just really understanding everything that's going on. You know, Jean Flee, so when it when you're thinking about Softwave, when folks are thinking about Softwave when they're listening to this, what in your opinion are you seeing in this company that maybe the market is completely missing or is getting it's getting overlooked? >> Sure. Um so I don't think that the market is missing. I think besides a little bubble on social media that we that follow this company. I think the company is really under the radar from big institutions and for for you know especially folks in the US. Um but what happens is that as I said you know so there is a lot of trends going on. So one of the big trends for subwave is we're talking about only the first device which is the the superb machine but they have another one which is for um muscle toning and regeneration of the muscle. All of that plays to role into the biggest trend today which is GLP1 drugs you know. Also at the end of the day I like to have companies who have second derivatives. You know you think about oh the GLP ones now the statistics is one out of eight people in the US take these drugs and beneficiaries are not the drug manufacturers but some other companies subway is one of them. When you get these drugs you know now we're talking about millions of people you lose a lot of weight very fast. You don't give time to your skin to shrink. Okay. So when you go this you have this swallow swallowing skin sagging there. So you need something that fixes it. Okay. So when you go and what these these people who go to take these drugs they don't want to really go to a surgery to for surgical lift. So these guys with with softway they can do something which are noninvasive that can completely smooth the face lifting sagging areas. with no risks at the same time preserving the fat that you don't want to lose after losing 30 pounds or 50 30 kilos. The last thing that you want is to lose your fat cells in the face. The fat cells in the face is what makes you look young. You don't want to look old and you want to rebuild muscle because these drugs also make you that not only you lose fat but you lose also muscle and that's the other segment of software which is they have a a device called pure impact VIP which they help build and tones the muscles so restores the strength so these guys can be the companion the perfect companion of GLP1 drugs so that's another aspect you have a lot so for instance they have around 12 FDA clearances. A lot of patents as well. But these guys and also the rest don't have that. They have clear clearance for lifting. You know lifting means that you need your skin is to go against gravity and and lift. Uh and you can market the word lift with FDA clearance. So EMO doesn't have that. You know, the doesn't have that. So this is very very very important. Um so the market doesn't have a clue on this aspect. Um the company is around in 52 countries today. But look Japan we just got it. What is the biggest one? China. Everything is done. It can be any time. It could be tomorrow or it can be one year but the work is done. Egg House is working hard to get that done. I as far as I understand all the papers are done. This is not embedded in the growth. all this growth that I told you 46% or whatever doesn't have China. South Korea is the biggest market per capita of of treatments of um aesthetic treatments starting to grow like crazy. Japan just began as I said Brazil Brazil we just got approval but as of Q4 Subway didn't was not selling anything there. This is the biggest market for um lipos suction for surgical um procedures. So then software will play a major role that so these are all the aspects that um that that I think people haven't understood and what people don't realize is that this pulse recurring revenue is really changing the unit economics for the practices and for software itself at the end it's an utilization platform you sell it and you really need that everybody uses and repeats it I give you another example so when when you have this GLP one drugs for example, then you go, you take them, you lose weight. You can, it's not like you do it one time, you know, every six months you can go and you go, you return your muscles with VIP impact, you retake. So, it's is a recurring situation that you can do it. So, it is um it is a lot of um of aspects I and ah another one for in Japan. Japan is a country where people don't like fake looks. You know when you have this this really a surgical lift you look fake in softway they regenerate your skin you you look your own same way you know just better younger you know so no pain no pain yes but not as painful as the others pain for sure yes but not at all as the other ones without as I said no downtime and no blood and all of that so I hope that No, no, that was that was very helpful for So, okay, JP to to kind of put a bow on the uh on your on the software softwave pitch here uh you know because we've done about done about 20 minutes and I think we've gotten kind of the main crux. Final question then for you is you know when you think about your thesis and you know the size of the position all all that good stuff. What would you say? What aspect of your thesis or what aspect of the company? Any anything having to do with Softwave keeps you up at night or what what are the main risks that folks should really be aware of when they're starting to put together their own thesis around the company? >> There is a I mean this is this aesthetic industry is always volatile. So you have but also let's say from from when you when you when you think about risks. One risk that for sure is very important to know is that um Shimon House has been in legal fights all his life pretty much you know. So he was in legal fight in Cinnon, he was a legal fight in Lummenis. This could happen more you know. So these are a risk that is good that he's very combative and all but it could be that when they you have oh there is a you know patent litigation here or there this risk technology obsolence it is a risk as well but look we still have laser doing things there you know. Um so if you are have a lot of machines now working well with better unit economics than the rest for a technology to come and be better it needs to be a lot better like what subway is doing you know to replace it with what look is still not dead it's still just hanging there so that is a risk you have of course geopolitical risk the companies from Israel you know so manufacturers the companies a company RH electronics uh sitting in Israel. So you have these aspects a regulatory change of course tomorrow can happen you know you get imagine the Japanese said now we reverse the approval so there is a lot of risks that can happen how I see them in my position I haven't sold a single share today zero absolutely zero is because everything that is happening is better than my estimation even there is don't don't wait in a situation now that it is it is uh uh complicated for me you know And we are talking about look we haven't spoken about evaluation or any of that the stock popped up yesterday again I had evaluation and before the the Q1 results growing at 30% per year and we were doing around 20 times earnings 2027 you know um right now I had to move a little bit to to now well but the stock moved a little bit so but still I am around with 35% and growth. We're talking about 20 to 22 times 2027. This is just next year, you know, and we're talking about a lot lower in in 2028. Um, this doesn't change anything for me for for for let's say the risking a little bit the position now. I have to be start being annoying annoyed. Um, and that's not the case today, you know. So it could be the risk exist and it's I mean it's a 600 million market company so anything can happen but these are this is these are the risks I'm happy taking you know I mean I I need to monitor them like like a crazy eagle but yeah >> no absolutely well listen I appreciate you uh you digging in and providing us you know that a look into Oh >> yeah I got one thing which because so much I mean so >> listen this is this is But this is good practice for you. This is good. >> You know what is something I don't listen? I don't like putting you in a box, you know, but uh listen, I know this could easily go 3 hours, you know. >> This is a company that was founded in 2015. A new technology that didn't pretty much exist in the form that they are putting it. The ultrasound of course did, but not the way they are they are doing it. Um the company reached profitability last year and now is consistently profitable even in Q1 which is the lowest quarter. This year they were profitable. So we are now really in the black cash flow positive. So cash flow was pretty much zero this quarter but they produced 9 million cash flow in Q4 uh last year and health cash flow just I don't know 4 million out of working capital. The other one was really really healthy cash flow. So imagine this level of growth with real profitability. This is not a company that is needing to you know raise unless there is a massive expansion in China needed but it will be luxury but it's really good profitability with cash flow generation on top of all what I'm saying you know and my model for let's say what I'm estimation is that is with 35% yes 2020 20 times earnings next year that doesn't take into account Brazil that doesn't take into account China that doesn't take into account any new product or any new service that can come. So it is a very very very interesting situation you know. >> Well Sean well full disclosure I'm not a shareholder in softwave. Uh >> I am and I can sell anytime anyway. Well, JP, to kind of, you know, wrap up because we've done we're coming up on about an hour in our our conversation here. And I did mention at the top that, you know, >> I'm going to leave it to you. How do you want to address uh you know, recent social media posts and dealing with all that? I again, I know that could be another 4hour conversation regarding, you know, >> oh, you are opening the Pandora box. >> I'm not trying to. I really am not. But I mean, listen, there might be a few people that tune in just to see if you have a comment on it. So, I'll leave it to you. Comment how you see fit and then we'll move on. >> On what? Tell me >> on what on uh you know, in in Shelly, right? You know, you you you know, you were an investor, you posted there, you closed your position, >> address it how you see fit. No, the company um um doesn't didn't. So, it's not producing cash flow already for a while in a way that I like to see it. It's not that the cash flow is it's not like Uber that didn't produce cash flow for years because it's invested on something. Not here was stuck on on on receivables for a long time. is not the the the Amazon situation only because the the Amazon situation that occurred uh is let's say one year oldish but this is for two years the company accumulated has not generated an cash flow for around like three years 100% zero so there is a time where I lose my patience on that um and one thing that actually people miss completely is that I mean the the company has all the upside potential that you can imagine. The company can become a platform. It's is is really extraordinary like the potential of the company. However, you know what I think is that the problem with Amazon, you know, people don't actually think people what they believe is oh Amazon has a problem. What is the problem with Amazon with with Shelly is that they say guys we need to make 25% margins. Okay, so we give you an invoice or we lower the products or you don't sell, you know. So Shel said, "Okay, we lower our margins substantially or we cut the revenues or we buy or we find distributors that um will sell to Shelly." And I think the market is is is not understanding that. Okay, so Amazon doesn't have problems with this distributor. Then it's like they found a solution forever or what is the story? So Shelly needs to find constantly new distributors and new distributors to keep that because Amazon does the same thing to the distributors itself. So in my way there is a risk where um Shelly needs to pay a price whether or keep finding new distributors trying to make sure payment terms go super high or they lower the prices to Amazon and they don't sell and for me as a as the time when I was a shareholder I really prefer you know a big pain even if the share price was down and say look we are going to lower the prices on this percentage with Amazon we lower the gross margins for a bit But we are going to get paid you know and then with these huge earnings that they have had over the years are not going to be sitting in paper you know and that is something that is a risk for me and I was a very big position so they can solve it potentially yes but I don't I cannot be now thinking as I thought three years ago on all the potential now I need to see some it was it's a billion market cap company so I need to see some level of um you know much better metrics on on on working capital and there is a lot more small things that I'm going to tell you okay uh now but that was the main aspect and I think it's discipline and I don't when when also one part that is very very crazy to see is that when you sell a stock I mean I have sold so many stocks in my in this year alone already sold like five I don't know um you just sell because of your internal things like you don't like this food you don't like that it's up to whatever it's not like you are betting on it, you know, like now you are short or whatever. It's complete. You you we're a shareholder. This is up to this point. It was a safe investment for me. From this is not a safe investment for me or I don't see it fit at the time. That's pretty much how it is, you know. >> I would do that with any company. >> No, listen. what what was what was you what was cool about it and I and for those who you know are public with you know their their buys and and it's what I appreciated is that you were also very honest about you know well this is why I sold you know >> well one which is which yeah sorry no but one thing is important because because this is key >> I think you have to be a gentleman and you have to be an elegant if for over three years with I guess in the podcast the first time I was with you I think I pitch Shell. I don't remember but I I have pitched Shelly at some point in some podcast. I have pitch Shelly tons of times in my letters. I pitch Shelly in the micro cut conference in Idaho. >> Oh no no yeah we we were talk we talked about in Idaho. >> So I pitch Shelly all the time. So if I sell I think I have a moral duty just just to say I did it and why I don't know why the whole chaos happened. I don't know. Um but this is what anybody does. I lose I lose complete trust if somebody push me to a investment like crazy then the stock what and then I find out that he sold or she sold that right after and when after something happens or whatever it is you need to disclose it. So now what is happening is that maybe I have a rule that I will only disclose my exits in my letter or I don't know but I don't want this nonsense drama and all of this nonsense you know that was kind of of of uh ridiculous but also I'm much more let's say in a way I was more benign I'm much more you know like okay but now what I saw is that I will protect my environment a lot more you know I don't I have a lot to build you know I don't need to do this nonsense >> but I could I could um I let's say if it's hard what was hard for me was that is you can have different opinions but you cannot have your own facts you know so for instance I don't know was like >> the compensation when I say the optics about the compensation package everybody and their mothers were putting like um >> oh the the the the revenue was in the compensation package was was because of the revenue target the revenue was a backup it never play a role it was the target the the stock price over the last three months Even management had to rectify it on Twitter, you know, and nobody accept this and people go and ping me your I got problems with this, you know, it's like and you have the I even spoke with IA one time about it. I say like you have this desire to just say that in which you know in what in doing it >> but then you should just move on you know like this is nonsense. There was no settlement there. you just need to move on and and and enjoy with the people who you really care, you know. >> No, you know what? And and the main reason I even asked about it was to address it wasn't even necessarily to get into the nitty-gritty because if you want to see kind of, you know, the back and forth, there's actually, you know, listen, the Twitter X has its own issues sometimes when it comes to, you know, the just kind of the the the lower tier conversation about it. But but there is but but there actually I mean you know look I followed along I saw what some of the interactions was were and you know there was actually some good quality stuff back and forth that was phenomenal and for anybody that's you know really wanting to dive deep into an idea you know it was a cool interesting you know case study of seeing like all right someone who's being very honest about being like all right I exited the position here's why and there was some great push back from those that you know are still shareholders and that That's that's the good stuff, you know, and that's what the environment that I'm hoping to see more of and that, you know, I hope you're not super dissuaded from continuing to, you know, be, you know, be as transparent as possible because, you know, for all the the dre, you know, and I and we get that like, you know, there are going to be, you know, people who are shareholders that are going to be pissed off that someone's publicly, you know, saying why they they sold that has a little bit of a following. Um, but at the same time, I think it also opened up for some really good good stuff. Good quality back and forth conversation. Yeah, look, I'm not try just from from from an outsider having not done any kind of deep dive. So, I'm just saying like it looked like there was some good quality back and forth amongst some of the the you know, the folks that are you know, for for better or worse were upset about it. That that makes sense. the the well that's the point you know like you have when I move on so and this is the behavioral part that you know I can share with you real life situation >> I for me when it took me around a few days you know to actually make my mind completely when I saw the position was not hey you open the Pandora box you dilute the conver took me interaction with management it took me all interaction with all shareholders You know, it was like I was testing all my assumptions ups and down and here and there. But then when I move on, I want to move on and that's it. I need to invest money. I need to put also it's not like oh I you break up with your girl and then you look at the pictures forever and you cry, you know. So this situation ended up that for a week I needed to to end up on on on on more Shelly and on more Shelly and more Shelly and I just you know this and I want to be completely like the king of my my time. So even if I need to respond to and that lowered that and that was not something I I I I was happy with. But also when for instance management wrote is particularly one comment we had a wonderful conversation by the way with management afterwards but that oh the compensation package was this and then and then I I explained it and then he had to to explain again that y sorry it's correct and I and my understanding was correct which by the way all the other people were saying no and then but I didn't want to force and force and force and force on this you know I wanted to move on so then is this you know riskreward shall I put But then it's going to lead to this because behavioral you need to know yourself. Behavioral is if somebody pushes these things I will be annoyed or I will be forced to say if I find a mistake I will put it and what is what what is the return for that you know I already move on. So that's what my mind is oscillating. So I want to maybe put it in my letter done finish and maybe not live you know like or live as I mean I had sold already weeks ago like when I put it on Twitter had been probably three weeks or something you know but anyway all right well we'll close we'll close the book on that chapter if you have more questions or you want to follow up with Jean Phipe uh on you know on Softwave or more questions on show whatever it is you know it's uh I invite you to go and hound him on Twitter and X. Uh, final question for you, Jean. Uh, JP here. >> Sorry. >> Any question for >> Well, no, we're we're coming up on it. So, here final question for you here. You know, what what belief do you hold about investing that most of your peers would strongly disagree with, do you think? >> Well, first, you know, you should not you should not um defend like crazy your positions. Um, you know, like you should you should never be you should always be a skeptical of what management says. You know, I I see a lot on social media like whatever management says is exactly the truth and like a gospel. Um, that also all opinions are kind of the same. No, a lot of opinions are really dumb uh by many many many folks. Um, so depending on where it goes, you know. So some people opinion values this value a lot more than some other not and um so yeah so the the real thing here is that people have a an investment and a hypothesis and they think that we should be right straight away you know I think that's wrong I think that we have a probability of being it but this is just going to be based on the future execution so maintainance diligence is way more important that finding uh interesting setups. Um I don't think that's very well um broadly understood. People think that one is in my portfolio then I need to just ensure that I die like a gladiator with it. Um I mean I can't talk more about kind of things a lot of things I changed my mind you know like >> oh well we'll channel we'll save that one for our next conversation. So Jean Phipe with that you know we covered a lot today. Where can our audience go and follow you on social media uh to hound you hound your DMs uh as well as maybe get in touch with you you know about the fund. >> Sure anytime. Um they >> give me your handle. What's your handle? >> Um JPT uh like the watch t I sort with the one at the end. And um in the same my email is jpot well at arawoka capital.com um any any anybody who wants to talk to me about good things um just let me know. >> Very good. Well and you know and push back. No I'm just kidding. Uh JP thank you for joining. >> Good. >> Yeah push back's important JP. >> Honest push backs is the most important and beautiful things. honest push back and emotional push backs and with not deviating from the substance. So I have a rule of push backs if you want to for finish this thing. When you and I are in an argument, we know probably if one story you like I don't the moment we deviate from the substance. The moment I say oh but you said it in a wrong way I already I already lose my mark you know. So I appreciate people who go with the substance completely. We try to really attack the substance here or because that's beautiful there. This way we really can go to the peeling of the onion the moment we are oh comments on personal or different aspects is and you really need to remove this you know you you give up this conversation. So on on one hand push backs are the most amazing things but on the other hand it needs to be in a in a very smart way you know >> 100%. I will JP with that. Thank you for joining me. Really do appreciate it. Good luck. Stay safe >> and hopefully see hopefully see you in Vegas. >> I'm going to do my best. I'm gonna do my best. We can make a a nice a nice nice have a nice time there. >> 100%, man. All right. Thank you, dude. Ciao.
Compounding Without Ego with Jean Philippe Tissot, Founder & Fund Manager at Arauca Capital
Summary
In this episode of the Planet MicroCap Podcast, I spoke with Jean Philippe Tissot, Founder and Fund Manager at Arauca Capital, …Transcript
Welcome to the Planet Micro Cap podcast, the number one destination for everything micro cap investing. I'm your host, Robert Craft, and each week I sit down with elite investors, CEOs, and market experts to uncover actionable insights and real world lessons you can apply immediately. Are you a new or experienced micro cap investor? Do you want to meet Microcap management teams as well as other micro cap investors from around the world? Planet Microap hosts the highest quality in-person micro cap events in North America. The mission is to bring the best micro cap investors, companies, and allocators together to gather, connect, and grow. Visit planetmicrocap.com to learn more about our Las Vegas and Toronto events. Now, a quick disclaimer. This presentation is forformational purposes only and should not be construed as a recommendation to purchase or sell any security referenced herein. Planet Microap holdings LLC and MicroAP Club LLC are not licensed brokers nor registered investment advisors. We our partners, contractors, members, subscribers, guests, or affiliates may or may not hold positions in one or more of the securities mentioned in this presentation and may trade in such securities at any time. We may have received cash compensation for one or more participants for presenting at past, present, or future events. We recommend you consult a licensed investment adviser, broker, or legal counsel before purchasing or selling any securities referenced in this presentation. In this episode of the Planet Micro Cap podcast, I spoke with Jean Phipe Tiso, founder and fund manager at Aroka Capital to dig into his behavioral framework for investing and why he believes managing your psychology is the real edge in micro cap markets, not finding the next great setup. We break down how his tolerance for hairiness shifts depending on position size and company stage. Why an investment thesis or hypothesis tends to break slowly at first like human relationships as facts shift on things that already bother him until additional issues combined to make selling an easy decision and his deep dive into Softwave, a non-invasive aesthetics device company. The symbol is Sofw on the Tel Aviv Stock Exchange. Jean actually will be hosting a fireside Q&A with Softwave Management at our event in Las Vegas. We mentioned several companies and sectors during this conversation and I'm not a shareholder in any of them. And with that, please enjoy my conversation with Jean Phipe Tiso. Jean Phipe or JP. I might go back and forth depending on the the mood. >> For you, of course. >> Thanks for joining me, man. How you doing? >> Yeah, great. Happy to be back with you in a few years on this. But so no, doing great. Hope you guys too also there, huh? >> Absolutely, man. We're you know, listen, last time we saw each other, I think we were having a few drinks um at the rooftop in in Idaho. Man, that was fun. That was fun. Who's hanging with us? What was his name again? Was it was his name Fernando or something? He was from Mexico. >> Rodrigo Rodrigo Rodrigo. That's a right there. >> Rodrigo. Yeah, that was that was that was a good time, man. We listen, we're still we still need to go down and and and hang at one of his restaurants, you know. That was that was awesome. >> Absolutely. That was that was really fun. Wonderful conference, you know. So, >> yes, you know, there you go. Like, you know, you go to a conference, you end up hanging out for a few hours and we just uh you know, listen, Jean Phipe was on one, so maybe I understood every fourth word he said, but we're going to do okay tonight or tonight. Tonight, your time. Well, Jean Philipe, I invited you back on because hey, look, man, it's been a few years since you had since we had you on the podcast. We're talking about all sorts of some great stuff. And, you know, I thought I'd invite you back on to, you know, one to do kind of a call back and talk through, you know, how things have changed, your investing style, all that all that good stuff. And then also, you have a a company to uh talk through with us here today. So, and for those who are tuning in expecting us to, you know, do a deep dive on, you know, all the stuff he's talked about on social media, we'll probably address it at the end a little bit, but, you know, we're gonna we're going to dig into some other stuff. >> Pandora boxes. >> Yeah, >> we're going to dig into some other stuff first. Okay. So, uh you know, Jean Felipe, to kick us off, you know, last time we spoke, uh you know, here we go. We're gonna get you get you right away here. So uh last time we spoke you framed investing around behavior, market math and real world experience. H how has your waiting of those pillars changed uh today? >> Uh not at all. I mean it's it's even more important the behavior than anything else you know. So um investing um you know like doesn't have a lot of barriers of entry but it has a very high barriers to su to succeed. And behavior is the part that is not really talked and what really kills the smart people is bad behavior you know. So a lot of laziness could be also uh killing a lot of investors. But the pillars are key and are really not changing. Actually the more I see the world of investing the more I see how important they are. So that's fundamental. Without these pillars I wouldn't be here I tell you. Huh. No, absolutely. I mean, anything specifically within those pillars in terms of, you know, behavior or or actual real world experience, look, it's been four years since we've uh chatted. A lot has changed. I mean, is there anything within those things where okay, in general, yes, those things are all important and and those pillars are going to continue to focus on them when, you know, looking at potential new ideas or, you know, digging into, you know, current ideas. Is there anything within that maybe maybe behavior-wise? Has anything changed the last few years? >> Think about think about when you are in investing where you are interested the most is just to be as closer to the reality of how the world evolves and for that you need to have a good synchronization with what's happening. So if you take all the facts with an assumption that you are never correct but you're just exploring you know you are not egocentric that because I have a position here I need to defend it until the end of my life uh or because oh I sold I want uh short then the whole thing is going to be the end of the world. You can see the the world like an onion that when you have a hypothesis of things and as facts evolved you just need to you are closer to the reality but only if you behave properly. If you are too personalizing yourself with a position uh you know like you end up like defending not seeing what can happen not seeing uh when there are signals that can make you change. Um that also is when you are very excited with a position. You know there are many times that we have situations that are oh valuation is great management up to the point is great uh everything is but facts change relationships change in life with your girlfriends uh wives whatever you know so it's very important to be neutral on that and that's behavior that's behavior you know so behavior is king you know it's absolutely king so you you really want to be this as dispassionate as you can take everything and assumption that you are kind of wrong to prove it. So every time I have a position, I want to hear the other side of voices, especially if it's people I can respect and they have really like um good arguments to make me probably realize that I'm wrong. The real thing on investing is to minimize the losses, you know. So big gains with big losses don't take you anywhere. So the earlier you identify that you can be wrong, the better for you, you know, and that can only happen with a proper behavior. It's very easy to say. It's extremely hard to know it. Just look at uh the world around. So you know, I have to ask you because you know I we've hung out a couple times and like you know you're like one of the most impassionate people I know. When you're getting when you're on one like you're you you let me know. How hard is that for you? you know, and it just personally like we can speak in generalities of like, all right, we got to make neutral new new news. I got to make sure, you know, make sure I stay level-headed so that I make, you know, the best decision for for uh for just make the best decision once the new news come in. But for you personally, I mean, listen, I'm a passionate dude as well. Like I I it's it's tough sometimes when you see new you're like or you know you know like how how for you >> what is the hard part when facts change against your hypothesis or when because there are many things that can make you >> a little bit you know like in >> I'd say that I'd say that on both the positive and negative side >> um for me now I'm much more relaxed with that you know for me I don't get merit with any position. Today we can talk about Subway. I love it. My biggest position today, tomorrow I can sell if the facts change and absolutely I don't care you know absolutely not trust for me you know like the more people it's very like not intuitive but you should be much less tolerant to sloppiness with the higher positions in your portfolio what with the beginning ones. So if you have things that are annoying you at a 3% position and the things don't uh get better over time then you should exit in an easier way you know but you should not just let compound things that annoy you. If that thing doesn't annoy you, that's fine. But to me, if something is bothering me for a while, I try to help. If it's not potentially happening or I don't have any connection with the company, it's just very easy for me to set like it's very easy. Now, what is difficult is when I lose trust with management, you know, it's like, oh [ __ ] you know, sorry. It's like, oh, I thought about this. And it has happened a lot of times. I've been doing that for 13 years now, you know. So I can tell you every two years probably my complete perception of a particular member of a management team of one of the top five companies I have every two years maybe changes my perception. There's one, two, three elements that I said this is not what I wanted. And for me it's like I'm not married with any. I mean remember our common friend Ardam. He says friendly with management but no friends. So it's absolutely true and that's exactly how it should be. It should be it should be use of for me. It's not not not an issue for me. What I really care is about compounding the capital. I have investors. I have my majority of my net worth is in my fund. So I'm not really looking to be right, you know. I want to compound. If tomorrow I'm wrong on a position is fine. And also facts change. So we you you can have a lot of uh aspects that you are wrong. One is because you were actually wrong. Like the company was really bad. You thought it was good. you misread the trends of the industry, the market, but another things are really surprises like really something completely a war somewhere that can change the whole hypothesis that you had and you need to move on. So you need to be agile and you have to have flexibility in your mind. You know if you don't have that this doesn't take you anywhere you know like over the long time here we have you can be lucky for a long periods of time for one year one but for over long periods of time luck re is gone because you need to make constant repetitive good decisions you know it's like you can become rich by luck but you cannot remain rich by being luck you know so it's it's the point so when you know these are the rules of the market of of compounding you you know what you need to focus in something else by the way for behavior I actually something I forgot I'm extremely more disciplined on my um environment so I narrow down the people I talk I narrow down the different environments that I think are not adding value to me um enormously and life is short there's a lot of fun I'm having with this is not easy and you know You need to deal with people who make you better you know and you don't know many and this happens very easily maybe I realize that X was different than Y then you know I need to improve my and then remove some connections and see some aspects that's part of the game look Buffett how he he he he he he has done it over his entire life is by really focusing on a on an environment and and I think it's is the more I have done this job the more I realize how important is >> see I knew that yeah see we took the next step and you told you you have gotten more disciplined in in our old age here you know but one other question I had you mentioned you know not being as tolerant of the the sloppiness but you know look I say you say sloppiness I I you say sloppiness I say hairiness you know uh >> and you know dealing in micro caps you know for the most part most setups are you know there's some hairiness to it but that's what also ultimately is the opportunity because that's why most of the market probably ignored it. And from your perspective, how much tolerance do you have for toariness or is there only is there certain types of things that you're more tolerant over than others? Let's say >> that doesn't have an absolute answer that all depends on the stage. >> Oh, no. It's a great podcast question. That's why >> absolutely great podcast question. That depends on the stage of the company, right? So if you have a company which is you know like kind of a startup starting a few years ago they are proving themselves there is a lot of sloppiness that you can tolerate you know you can say I put one two maybe two and a half% of the portfolio here but this is high risk so you don't have margin safety but the margin of safety you do it with a low size position you can be wrong and if you are wrong at a zero then you lose 2%. there's not the end of the world you know so then you can be more tolerant however as probably the company executes well maybe also some luck and the company becomes a two bagger three bagger whatever it's a 10% position now the my tolerance decreases and now it's a 100 million company and it will and now it's a whatever 1 billion you know you know that now you need to say okay now it's a bigger portion of my portfolio so the risk is is is higher on my side Um and you know that and this is something that is not intuitive. I don't see this discourse happening. But what you need to think is like what it took a company from 100 million to a billion. It's not going to be the same 1 billion to 10 billion. Look how companies evolve. You know micro caps most of don't make it. It's very very rare that a micro cap makes. Some of them make it extraordinary. The majority of companies are medical business. There is a lot of um statistics about it. I don't need to name it. That's part of pillar two understanding the market. So but you want to say to say oh maybe this is one of these exceptions that is going to compound forever but for that they really need to improve in all aspects you know so otherwise it's easy that you know they can remain there forever or they can go back so my tolerance depends on the stage of the company it is you know so but it you can say the rule is the bigger it becomes in my portfolio the more prominent the company becomes the better, the more professional, the more superb in all aspects of the company they need to be, you know. >> Absolutely. So my final question before we get into, you know, into talking a little bit more about soft wave, which you mentioned earlier, >> we you've emphasized min minimizing permanent loss over volatility. You know, that that's one that's what you said in our previous thing. made that very evidently clear already in our first you know 10 minutes here chatting. Has anything recently challenge that principle in practice would you say? No well all the time you are challenged permanently with this you know so because you have let's say as an investor you always deal with two more things but mainly two aspects one are the intrinsic situations of your companies and the other ones are the macro situations you know so micro situations we we we have the worst we have whatever happens that probably if something really really really bad happens this could be a cataclysmic for markets and all Um on the same on the other hand in the companies some if something changes and you are not aware of it and you're not paying attention something really bad can happen on on your own intrinsic part of your portfolio. So you are constantly with that you know and also one one key risk is that if you become too directional on micro situations for instance uh in the Iran thing I said the risk of something like the Iranians destroy the oil infrastructures for instance of the Gulf nations is probably 5% but if it happens it's cataclysmic but that forces me to be in a way or having some options put options somewhere just being like if that happens is not the end of the world for me. But at the same time, getting directional and believing that's the direction that is going to happen can destroy you because you become too paranoid and then you don't invest and you just like oh probably exit a company. So and that is also a loss you know. So then it's a permanent between. So why I'm really crazy is that when there are factors that are intrinsic in the company that really really I cannot tolerate more I exit and move on you know I mean over my 12 13 years with this one doing it is insane. I have company being the top number one that I sell within one day or two days has happened all the time can I mean MGP but with many many many companies that's part of the game you know so it could be one thing that I heard from management it could be like you know the thesis was the hypothesis was playing differently because of some metrics that I I I I really follow so this is part of of of of an ongoing basis and you are constantly challenged and you need to be to be ready to to always act let's say in the most prudent manner. Huh? >> I speaking of that I mean you know cuz some people might hear that. I'm hearing it and I'm thinking okay if like what like what is the the weight of the facts that change right? like is it something small that you're like all right that's not that big a deal or is it you know or or even if you think it might if it's small like oh the facts changed I'm out or is it something where you're like whoa all right that obviously if it's something you know in your opinion that's very material you're like all right well facts have changed here for sure you know you know what I'm talking about >> absolutely I tell you I tell you I try to make an analogy >> um before you got married you had many girlfriends I guess right so it's a similar story so when you are with somebody um it's very rare that you go and say let's say before we got married and all of that so that you go one day and say oh the facts change you know I'm break up with you tomorrow so small things oh you know one the other here I don't trust here this aspect is you guys need to prove it here but that guys don't uh market is performing on that and then what is one metric you follow in combination of probably a year of announce or three months of announce or something that announce annoying you um and then you just decide finish the story at the same time volatility brings information in markets in people in everything so when there are aspects where so that's why when everything works well everybody's happy friends or or party on but when things are starting to get confrontational but in a nice way. Oh guy. So when people management teams or different aspects or guys this aspect needs to be improved what happens with that or and then you see how they don't want you to ask these questions or they don't want you to follow on this and then the trust starts to why you know and when trust starts to shift and that's also a big part you know I mean many cases many many cases of when management tells you this is going to happen how many like look I'm in in 2020 or these years all the management teams of tons of micro caps promising like everything they're going to do promise and then very few deliver what they were doing completely you know and delivering is a very subjective word because delivering is revenues is revenues and cash is all so it depends so it is um it is a whole combination of factors that play into role you Huh? >> 100%. >> One day that comes >> that day be something you were annoyed before you were military tracking. The the thing is like if you actually you know you are never fully happy with things you know but there are things that they need to be improved over time. If they actually deteriorate or management tells you BS on something or you know that they try to disguise things whatever you know you know that cash flow is negative but the because and then they show you that is super positive because they they don't tell you that this aspect is is is making it positive but it's not this is how they lose me you know you know or when they say by December we do that look what happened in with mono precise back in 2020 or 21 when management promised everything in the world and then nothing happened but they didn't even come that they didn't do deliver what they said and that's how they lose me so I I I lose trust and slowly and then suddenly but it's never suddenly one the decision is easy uh you know it's like but it's it's like the relationships >> yeah I very much appreciate that so all right Jean Phipe JP we're finally there. You know, uh you had an idea that you wanted to uh you know, talk through a little bit here and uh you know, I might serve up some questions. I also might just let you run, you know, because >> why not? Come on. >> Yeah. You know, look, so you know, Jean Phipe, talk to me, you know, uh Softwave, you know what? Why is it why is this idea interesting to you? Why why this idea and why now? Well, first disclosure, no recommendation and all of that and I'm not going to I'm if I change my mind, I sell immediately. Okay. >> Uh this is a company I hold already for a while. So multibagger for the fund is the biggest position now. Um is just being um or the company's executing extraordinary um even better than I expected actually a lot better than I expected in all fronts which is rare. I don't know if it's going to continue doing that, but it's done until today, you know. So that's why the story they reported yesterday actually. So it's a lot of new data. I know like I made probably mixed numbers up. So but um so that is just a pramulous uh but then yeah so you you you can start asking or shall I introduce the company or whatever you say. >> Let's dig in. tell us uh you know tell us a little bit you know what that what do they do uh and and as well as you know why just ba your basic your basic thesis around software >> yeah sure so just trades on the television stock exchange soon and going to be listed in the US they're already working on that is around 600 million market cap it's um a utilit utilization platform company which I'm going to for that later. But they operate in the noninvas invasive uh aesthetic device industry, right? So what they basically do, they try to make you look younger and better. So they with your own look they try to rejuvenate the skin um in it started in the face and now it all goes to the body with a new applicator they have and they are doing by actually identifying the pain points of all the legacy device companies today. uh because this company is founded by the creators of the industry which is something really interesting. So that is just small what they do. Um we're can we can speak in in detail. Um but if you want I can I can mention a little bit something about the founders management uh which is key. So yeah, when we talk about the aesthetic device industry, we need to talk about um Shimon Ehouse, you know, which is he's basically the godfire of the industry, right? So he invented IPL, which is a technology um which is the technology that pretty much was after lasers um that's intense pulse light. That was in the 19s and that was where you know lasers um operate with one wavelength uh intense pulse light was a broader spectrum so it was more effective and he created a company called Lummenis the IPO multi-billion company uh he started bringing well there were a lot of people in Lummenis that are part of um software today he eventually made an acquisition uh I think the company was lesser industries I don't remember exactly but that was not a good one and the stock went down. He eventually left Lummenus um with a proxified and all of that and he founded another company right after called Sinon where he invented another technology which they invented Ellos which is a combination between light and radio frequency. Riore frequency is creating energy with electricity. Simple as that, you know. And that was was even better than than than the previous um just IPL technology. So after so they sold it to Apex to a private equity company. The the company is still somehow part of it. I don't know if they lost the name but these two companies remain in a way. um not exactly in the same uh nature but later on he find or he founded software not only alone but with the best people of the industry. So he the CEO of um of software today is a guy called Luis Cafiori. was the CEO of Sinon, okay? And he was a guy who was a expert on scaling the business. And you will know why that's so important in a second. The the whole another guy is called Ariel um is Verdict, which is the CTO of Sowell. This guy was the inventor of a machine called ultra shade which with ultrasound technology um they kill fat cells and that's important for today because when you are trying to rejuvenate the skin you don't want to kill fat cells so it's important to know and this this guy sold ultra shape to syno you know so you have all these people who know exactly where they are doing and all together in subway why is that is important because it's the risk execution What does it mean? Just a few months ago, last year, so we got approval to sell in Japan. Okay. So, what does it mean for Luis Cafiori going to Japan and tell the distributors? Probably he's talking to one of the guys he made rich like 20 years ago with Cynisk execution by the godfathers of the industry. So, it's very very very serious. These guys know exactly what they are doing. They know the context and identified all the pain points of the legacy technologies and created software which covers them all. We are going to kind of explain later on the differences between some of the other technologies and software but that's let's say management today you know. >> Absolutely. So let's dig into the actual device itself, the the equipment that they're selling to clinics and what what would you say makes it unique and different compared to what has is also available some of their competitors you know why are they why are they you know in theory winning business over them or or give us give us more give us more >> um I need to bring a little bit before that to understand what it is >> our skin when we age The problem with our skin is very simple. We lose the collagen um structure and the elastin. Collagen we don't produce easily and elastin actually we don't produce a saddles at all. So what you need to create uh is a an injury on the skin that the injury itself wakes up one cell called the fibroblasts that is producing elastin and collagen uh collagen and that injury is created by these legacy devices and by software as well with a thermal heat with heat with heat. So it's a thermal injury. So that's what you need to do. So all these machines whatever the technology behind they need to harm your skin you know at some point and they need to wake up these fibroblasts so that you it wakes and produces collagen analog. By the way when these fibroblast they get lazy they they lose the grasp to the the structure of the collagen they fall down and actually they start creating some enzymes that ensure that more collagen get destroyed. So that's why you age very fast. So that is how it works. Everybody needs to do that. So you create energy, you have a heat somehow. So laser is with light. Laser problem. What is the laser problem? That light targets pigments. So when you have dark skin, you get a burn mark. And this is the problem of laser years, 20 years on that. Laser also burns your skin because the epidermis which is the path here it gets completely burned. So that's not good. Another technology is radio frequency. Radio frequency is operate let's say the most known company of radio frequency. Well we actually have two. One is thermwich. Thermage is a very good company. It's owned by Sulta and they are doing very well in in Asia particularly. uh they have a problem because the energy um that it passes it it infers with how hydrotated you are right so if you drunk a lot of water um the electricity flows easy but if you didn't drink a lot of water during the day it doesn't feel so you don't know where at which depth is going to hit you in your skin and these fibroblast leaving the 1.5 ml around. This is like the reticular nerves. If it's too deep, you can destroy nerves, motor nerves, and then you don't move or fat cells. You know, you don't want to lose fat cells you have. So that's one aspect. Then you have in mode. Well, in mode is radio frequency, but with needles, so you actually penetrate your skin, you have a lot of downtime with this, you know, wicks, you become a waffen. This is very painful you know so it's is it's is very bad um I mean in modem mode is is now it had 6% growth reporting today or something like that last year 6% down and the previous year 20% down you know so frequency with NOS is pretty much obsolete now and then you have there are more companies but these are the main ones altera has um ultrasound which the difference is hyperfocus so it's some single point that hits you and it hits you very painful. They are effective but very very painful and they have different transducers and different depths. So what happened? They have one of 4.5 mm that's the risky area you know in that part you have um you have well the nerves and and the and the fat cells. So that could have a very problem. So you have you know like safety risks, you have pain risks, you have downtime and in subway you don't have that. So Soapway operates with ultrasound energy you know that's mechanical energy. So it doesn't have problems with light it doesn't have problems with water or resistance um it goes directly it covers compared to it covers a broader spectrum. So ultraa will cover around 5% of the tissue of the point um softway because it's a you know it's a flat area like a synchronous cylinders they have seven cylinders um it covers around 35% so it covers a lot more spectrum it only goes to 1.5 milll so it doesn't risk at all to penetrate the subcutaneous part you don't have downtime you do have a little pain not at all like the other ones you don't have downtime you can have it in your you know like for example a launch and you can go back to work. Um so it covers all the pain and safety problems compared to the others. >> Got it. All right. So I mean let's talk let's talk a little market penetration here. You know how >> you know you clearly made the case for why you know it they have I guess you'd say a you know a better potential solution here. you know how how much have they how much of the market have they actually penetrated where are they currently selling the uh the device and also I mean this is a highly crowded space you know how the part two of that question is how difficult has it been for the actual adoption in the clinics for them to say all right we'll start using this versus maybe what we previously had done >> well you can I can just share with you um the the growth of these guy these guys I mentioned. So la last night or yesterday uh so reported 46% growth on Q1 which is the weakest quarter. Last year was 46% as well in the entire year. Q4 the highest quarter was around 58% growth and I told you in mode was declining in 2024 20%. Last year they declined 6%. Just now Q1 was barely positive but still below two years ago. Altera uh is private uh but they grow because you could see the LinkedIn post of the CEO so they grow around 20%. Um the whole company isa is the one that is listed they are grow also 20% very strong very strong in Asia um so these companies are doing some of them uh like and the are still doing well um in mode is doing really bad software is doing extraordinarily well what it's telling you is that and the most important metric that you need to always look at it is that the consumable part which is a key element. So you sell the device you know the device cost around 100k 65% profit margin call it that's not the real business the real business is the consumable okay so the consumable is something where it tells you whether people are happy with it they didn't feel a lot of pain they don't want to touch it again or they have some risky safety measures they don't want to touch it again the consumable part the recurring revenue part on software reach 45% yesterday. This is of total revenues. So this is huge. In Q4 it grew 83% or 86% 80 something%. This tells you that the the the the the service or what the people feel is very good. You know it's having results. It's not that painful because people are coming back more than any other. The consumable is very important to know because as I said that these founders uh identify all the pain points. It's not the pain points on the patient itself but the pain points also for the pract for for the dermatology. So for medba companies who acquired the the the machine the the recurring revenue is very key. Software ala the physical components you know in subway are pulses. You buy them with Wi-Fi, download it in your machine, use them, boom. So inventory zero, no need of logistics, no need of working capital, no risk that you don't have the inventory as somebody comes and you cannot do it. It's delegable when you are within mode. You need to do it by a doctor. You cannot penetrate some skin in some way. You can have an assistant and the doctor can focus on a 20,000 surgery lift. So it completely changes in all aspects of the company, the the industry, you know. >> Yeah. So Jean Phipe, this is this is a question that I'm borrowing from uh my my buddy Andrew Walker over at uh over at Yet Another Value Podcast. It's probably my favorite question that he asks anybody that comes on. So, uh, Andrew, shout out this full credit for this question, but I think it's appropriate because I think it will help us hone in on, you know, the the real just really understanding everything that's going on. You know, Jean Flee, so when it when you're thinking about Softwave, when folks are thinking about Softwave when they're listening to this, what in your opinion are you seeing in this company that maybe the market is completely missing or is getting it's getting overlooked? >> Sure. Um so I don't think that the market is missing. I think besides a little bubble on social media that we that follow this company. I think the company is really under the radar from big institutions and for for you know especially folks in the US. Um but what happens is that as I said you know so there is a lot of trends going on. So one of the big trends for subwave is we're talking about only the first device which is the the superb machine but they have another one which is for um muscle toning and regeneration of the muscle. All of that plays to role into the biggest trend today which is GLP1 drugs you know. Also at the end of the day I like to have companies who have second derivatives. You know you think about oh the GLP ones now the statistics is one out of eight people in the US take these drugs and beneficiaries are not the drug manufacturers but some other companies subway is one of them. When you get these drugs you know now we're talking about millions of people you lose a lot of weight very fast. You don't give time to your skin to shrink. Okay. So when you go this you have this swallow swallowing skin sagging there. So you need something that fixes it. Okay. So when you go and what these these people who go to take these drugs they don't want to really go to a surgery to for surgical lift. So these guys with with softway they can do something which are noninvasive that can completely smooth the face lifting sagging areas. with no risks at the same time preserving the fat that you don't want to lose after losing 30 pounds or 50 30 kilos. The last thing that you want is to lose your fat cells in the face. The fat cells in the face is what makes you look young. You don't want to look old and you want to rebuild muscle because these drugs also make you that not only you lose fat but you lose also muscle and that's the other segment of software which is they have a a device called pure impact VIP which they help build and tones the muscles so restores the strength so these guys can be the companion the perfect companion of GLP1 drugs so that's another aspect you have a lot so for instance they have around 12 FDA clearances. A lot of patents as well. But these guys and also the rest don't have that. They have clear clearance for lifting. You know lifting means that you need your skin is to go against gravity and and lift. Uh and you can market the word lift with FDA clearance. So EMO doesn't have that. You know, the doesn't have that. So this is very very very important. Um so the market doesn't have a clue on this aspect. Um the company is around in 52 countries today. But look Japan we just got it. What is the biggest one? China. Everything is done. It can be any time. It could be tomorrow or it can be one year but the work is done. Egg House is working hard to get that done. I as far as I understand all the papers are done. This is not embedded in the growth. all this growth that I told you 46% or whatever doesn't have China. South Korea is the biggest market per capita of of treatments of um aesthetic treatments starting to grow like crazy. Japan just began as I said Brazil Brazil we just got approval but as of Q4 Subway didn't was not selling anything there. This is the biggest market for um lipos suction for surgical um procedures. So then software will play a major role that so these are all the aspects that um that that I think people haven't understood and what people don't realize is that this pulse recurring revenue is really changing the unit economics for the practices and for software itself at the end it's an utilization platform you sell it and you really need that everybody uses and repeats it I give you another example so when when you have this GLP one drugs for example, then you go, you take them, you lose weight. You can, it's not like you do it one time, you know, every six months you can go and you go, you return your muscles with VIP impact, you retake. So, it's is a recurring situation that you can do it. So, it is um it is a lot of um of aspects I and ah another one for in Japan. Japan is a country where people don't like fake looks. You know when you have this this really a surgical lift you look fake in softway they regenerate your skin you you look your own same way you know just better younger you know so no pain no pain yes but not as painful as the others pain for sure yes but not at all as the other ones without as I said no downtime and no blood and all of that so I hope that No, no, that was that was very helpful for So, okay, JP to to kind of put a bow on the uh on your on the software softwave pitch here uh you know because we've done about done about 20 minutes and I think we've gotten kind of the main crux. Final question then for you is you know when you think about your thesis and you know the size of the position all all that good stuff. What would you say? What aspect of your thesis or what aspect of the company? Any anything having to do with Softwave keeps you up at night or what what are the main risks that folks should really be aware of when they're starting to put together their own thesis around the company? >> There is a I mean this is this aesthetic industry is always volatile. So you have but also let's say from from when you when you when you think about risks. One risk that for sure is very important to know is that um Shimon House has been in legal fights all his life pretty much you know. So he was in legal fight in Cinnon, he was a legal fight in Lummenis. This could happen more you know. So these are a risk that is good that he's very combative and all but it could be that when they you have oh there is a you know patent litigation here or there this risk technology obsolence it is a risk as well but look we still have laser doing things there you know. Um so if you are have a lot of machines now working well with better unit economics than the rest for a technology to come and be better it needs to be a lot better like what subway is doing you know to replace it with what look is still not dead it's still just hanging there so that is a risk you have of course geopolitical risk the companies from Israel you know so manufacturers the companies a company RH electronics uh sitting in Israel. So you have these aspects a regulatory change of course tomorrow can happen you know you get imagine the Japanese said now we reverse the approval so there is a lot of risks that can happen how I see them in my position I haven't sold a single share today zero absolutely zero is because everything that is happening is better than my estimation even there is don't don't wait in a situation now that it is it is uh uh complicated for me you know And we are talking about look we haven't spoken about evaluation or any of that the stock popped up yesterday again I had evaluation and before the the Q1 results growing at 30% per year and we were doing around 20 times earnings 2027 you know um right now I had to move a little bit to to now well but the stock moved a little bit so but still I am around with 35% and growth. We're talking about 20 to 22 times 2027. This is just next year, you know, and we're talking about a lot lower in in 2028. Um, this doesn't change anything for me for for for let's say the risking a little bit the position now. I have to be start being annoying annoyed. Um, and that's not the case today, you know. So it could be the risk exist and it's I mean it's a 600 million market company so anything can happen but these are this is these are the risks I'm happy taking you know I mean I I need to monitor them like like a crazy eagle but yeah >> no absolutely well listen I appreciate you uh you digging in and providing us you know that a look into Oh >> yeah I got one thing which because so much I mean so >> listen this is this is But this is good practice for you. This is good. >> You know what is something I don't listen? I don't like putting you in a box, you know, but uh listen, I know this could easily go 3 hours, you know. >> This is a company that was founded in 2015. A new technology that didn't pretty much exist in the form that they are putting it. The ultrasound of course did, but not the way they are they are doing it. Um the company reached profitability last year and now is consistently profitable even in Q1 which is the lowest quarter. This year they were profitable. So we are now really in the black cash flow positive. So cash flow was pretty much zero this quarter but they produced 9 million cash flow in Q4 uh last year and health cash flow just I don't know 4 million out of working capital. The other one was really really healthy cash flow. So imagine this level of growth with real profitability. This is not a company that is needing to you know raise unless there is a massive expansion in China needed but it will be luxury but it's really good profitability with cash flow generation on top of all what I'm saying you know and my model for let's say what I'm estimation is that is with 35% yes 2020 20 times earnings next year that doesn't take into account Brazil that doesn't take into account China that doesn't take into account any new product or any new service that can come. So it is a very very very interesting situation you know. >> Well Sean well full disclosure I'm not a shareholder in softwave. Uh >> I am and I can sell anytime anyway. Well, JP, to kind of, you know, wrap up because we've done we're coming up on about an hour in our our conversation here. And I did mention at the top that, you know, >> I'm going to leave it to you. How do you want to address uh you know, recent social media posts and dealing with all that? I again, I know that could be another 4hour conversation regarding, you know, >> oh, you are opening the Pandora box. >> I'm not trying to. I really am not. But I mean, listen, there might be a few people that tune in just to see if you have a comment on it. So, I'll leave it to you. Comment how you see fit and then we'll move on. >> On what? Tell me >> on what on uh you know, in in Shelly, right? You know, you you you know, you were an investor, you posted there, you closed your position, >> address it how you see fit. No, the company um um doesn't didn't. So, it's not producing cash flow already for a while in a way that I like to see it. It's not that the cash flow is it's not like Uber that didn't produce cash flow for years because it's invested on something. Not here was stuck on on on receivables for a long time. is not the the the Amazon situation only because the the Amazon situation that occurred uh is let's say one year oldish but this is for two years the company accumulated has not generated an cash flow for around like three years 100% zero so there is a time where I lose my patience on that um and one thing that actually people miss completely is that I mean the the company has all the upside potential that you can imagine. The company can become a platform. It's is is really extraordinary like the potential of the company. However, you know what I think is that the problem with Amazon, you know, people don't actually think people what they believe is oh Amazon has a problem. What is the problem with Amazon with with Shelly is that they say guys we need to make 25% margins. Okay, so we give you an invoice or we lower the products or you don't sell, you know. So Shel said, "Okay, we lower our margins substantially or we cut the revenues or we buy or we find distributors that um will sell to Shelly." And I think the market is is is not understanding that. Okay, so Amazon doesn't have problems with this distributor. Then it's like they found a solution forever or what is the story? So Shelly needs to find constantly new distributors and new distributors to keep that because Amazon does the same thing to the distributors itself. So in my way there is a risk where um Shelly needs to pay a price whether or keep finding new distributors trying to make sure payment terms go super high or they lower the prices to Amazon and they don't sell and for me as a as the time when I was a shareholder I really prefer you know a big pain even if the share price was down and say look we are going to lower the prices on this percentage with Amazon we lower the gross margins for a bit But we are going to get paid you know and then with these huge earnings that they have had over the years are not going to be sitting in paper you know and that is something that is a risk for me and I was a very big position so they can solve it potentially yes but I don't I cannot be now thinking as I thought three years ago on all the potential now I need to see some it was it's a billion market cap company so I need to see some level of um you know much better metrics on on on working capital and there is a lot more small things that I'm going to tell you okay uh now but that was the main aspect and I think it's discipline and I don't when when also one part that is very very crazy to see is that when you sell a stock I mean I have sold so many stocks in my in this year alone already sold like five I don't know um you just sell because of your internal things like you don't like this food you don't like that it's up to whatever it's not like you are betting on it, you know, like now you are short or whatever. It's complete. You you we're a shareholder. This is up to this point. It was a safe investment for me. From this is not a safe investment for me or I don't see it fit at the time. That's pretty much how it is, you know. >> I would do that with any company. >> No, listen. what what was what was you what was cool about it and I and for those who you know are public with you know their their buys and and it's what I appreciated is that you were also very honest about you know well this is why I sold you know >> well one which is which yeah sorry no but one thing is important because because this is key >> I think you have to be a gentleman and you have to be an elegant if for over three years with I guess in the podcast the first time I was with you I think I pitch Shell. I don't remember but I I have pitched Shelly at some point in some podcast. I have pitch Shelly tons of times in my letters. I pitch Shelly in the micro cut conference in Idaho. >> Oh no no yeah we we were talk we talked about in Idaho. >> So I pitch Shelly all the time. So if I sell I think I have a moral duty just just to say I did it and why I don't know why the whole chaos happened. I don't know. Um but this is what anybody does. I lose I lose complete trust if somebody push me to a investment like crazy then the stock what and then I find out that he sold or she sold that right after and when after something happens or whatever it is you need to disclose it. So now what is happening is that maybe I have a rule that I will only disclose my exits in my letter or I don't know but I don't want this nonsense drama and all of this nonsense you know that was kind of of of uh ridiculous but also I'm much more let's say in a way I was more benign I'm much more you know like okay but now what I saw is that I will protect my environment a lot more you know I don't I have a lot to build you know I don't need to do this nonsense >> but I could I could um I let's say if it's hard what was hard for me was that is you can have different opinions but you cannot have your own facts you know so for instance I don't know was like >> the compensation when I say the optics about the compensation package everybody and their mothers were putting like um >> oh the the the the revenue was in the compensation package was was because of the revenue target the revenue was a backup it never play a role it was the target the the stock price over the last three months Even management had to rectify it on Twitter, you know, and nobody accept this and people go and ping me your I got problems with this, you know, it's like and you have the I even spoke with IA one time about it. I say like you have this desire to just say that in which you know in what in doing it >> but then you should just move on you know like this is nonsense. There was no settlement there. you just need to move on and and and enjoy with the people who you really care, you know. >> No, you know what? And and the main reason I even asked about it was to address it wasn't even necessarily to get into the nitty-gritty because if you want to see kind of, you know, the back and forth, there's actually, you know, listen, the Twitter X has its own issues sometimes when it comes to, you know, the just kind of the the the lower tier conversation about it. But but there is but but there actually I mean you know look I followed along I saw what some of the interactions was were and you know there was actually some good quality stuff back and forth that was phenomenal and for anybody that's you know really wanting to dive deep into an idea you know it was a cool interesting you know case study of seeing like all right someone who's being very honest about being like all right I exited the position here's why and there was some great push back from those that you know are still shareholders and that That's that's the good stuff, you know, and that's what the environment that I'm hoping to see more of and that, you know, I hope you're not super dissuaded from continuing to, you know, be, you know, be as transparent as possible because, you know, for all the the dre, you know, and I and we get that like, you know, there are going to be, you know, people who are shareholders that are going to be pissed off that someone's publicly, you know, saying why they they sold that has a little bit of a following. Um, but at the same time, I think it also opened up for some really good good stuff. Good quality back and forth conversation. Yeah, look, I'm not try just from from from an outsider having not done any kind of deep dive. So, I'm just saying like it looked like there was some good quality back and forth amongst some of the the you know, the folks that are you know, for for better or worse were upset about it. That that makes sense. the the well that's the point you know like you have when I move on so and this is the behavioral part that you know I can share with you real life situation >> I for me when it took me around a few days you know to actually make my mind completely when I saw the position was not hey you open the Pandora box you dilute the conver took me interaction with management it took me all interaction with all shareholders You know, it was like I was testing all my assumptions ups and down and here and there. But then when I move on, I want to move on and that's it. I need to invest money. I need to put also it's not like oh I you break up with your girl and then you look at the pictures forever and you cry, you know. So this situation ended up that for a week I needed to to end up on on on on more Shelly and on more Shelly and more Shelly and I just you know this and I want to be completely like the king of my my time. So even if I need to respond to and that lowered that and that was not something I I I I was happy with. But also when for instance management wrote is particularly one comment we had a wonderful conversation by the way with management afterwards but that oh the compensation package was this and then and then I I explained it and then he had to to explain again that y sorry it's correct and I and my understanding was correct which by the way all the other people were saying no and then but I didn't want to force and force and force and force on this you know I wanted to move on so then is this you know riskreward shall I put But then it's going to lead to this because behavioral you need to know yourself. Behavioral is if somebody pushes these things I will be annoyed or I will be forced to say if I find a mistake I will put it and what is what what is the return for that you know I already move on. So that's what my mind is oscillating. So I want to maybe put it in my letter done finish and maybe not live you know like or live as I mean I had sold already weeks ago like when I put it on Twitter had been probably three weeks or something you know but anyway all right well we'll close we'll close the book on that chapter if you have more questions or you want to follow up with Jean Phipe uh on you know on Softwave or more questions on show whatever it is you know it's uh I invite you to go and hound him on Twitter and X. Uh, final question for you, Jean. Uh, JP here. >> Sorry. >> Any question for >> Well, no, we're we're coming up on it. So, here final question for you here. You know, what what belief do you hold about investing that most of your peers would strongly disagree with, do you think? >> Well, first, you know, you should not you should not um defend like crazy your positions. Um, you know, like you should you should never be you should always be a skeptical of what management says. You know, I I see a lot on social media like whatever management says is exactly the truth and like a gospel. Um, that also all opinions are kind of the same. No, a lot of opinions are really dumb uh by many many many folks. Um, so depending on where it goes, you know. So some people opinion values this value a lot more than some other not and um so yeah so the the real thing here is that people have a an investment and a hypothesis and they think that we should be right straight away you know I think that's wrong I think that we have a probability of being it but this is just going to be based on the future execution so maintainance diligence is way more important that finding uh interesting setups. Um I don't think that's very well um broadly understood. People think that one is in my portfolio then I need to just ensure that I die like a gladiator with it. Um I mean I can't talk more about kind of things a lot of things I changed my mind you know like >> oh well we'll channel we'll save that one for our next conversation. So Jean Phipe with that you know we covered a lot today. Where can our audience go and follow you on social media uh to hound you hound your DMs uh as well as maybe get in touch with you you know about the fund. >> Sure anytime. Um they >> give me your handle. What's your handle? >> Um JPT uh like the watch t I sort with the one at the end. And um in the same my email is jpot well at arawoka capital.com um any any anybody who wants to talk to me about good things um just let me know. >> Very good. Well and you know and push back. No I'm just kidding. Uh JP thank you for joining. >> Good. >> Yeah push back's important JP. >> Honest push backs is the most important and beautiful things. honest push back and emotional push backs and with not deviating from the substance. So I have a rule of push backs if you want to for finish this thing. When you and I are in an argument, we know probably if one story you like I don't the moment we deviate from the substance. The moment I say oh but you said it in a wrong way I already I already lose my mark you know. So I appreciate people who go with the substance completely. We try to really attack the substance here or because that's beautiful there. This way we really can go to the peeling of the onion the moment we are oh comments on personal or different aspects is and you really need to remove this you know you you give up this conversation. So on on one hand push backs are the most amazing things but on the other hand it needs to be in a in a very smart way you know >> 100%. I will JP with that. Thank you for joining me. Really do appreciate it. Good luck. Stay safe >> and hopefully see hopefully see you in Vegas. >> I'm going to do my best. I'm gonna do my best. We can make a a nice a nice nice have a nice time there. >> 100%, man. All right. Thank you, dude. Ciao.