Skin In The Game

Tumor-Busting Tech Becomes the Ultimate Beauty Treatment

Celebrity Endorsements Power World-Class Economics

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Ten-year-old Edgar couldn’t spell the word “cabin”… even after writing it on the blackboard 500 times.

Back in the late 1880s, there were no early interventions for dyslexia. And after the “cabin” incident, Edgar’s father lost patience and decided to apply his favored teaching tool: the backhand.

Edgar saw stars… and then, an angel.

“If you can sleep a little,” the glowing being whispered, “we can help you.” Stunned by the blow, Edgar slipped into unconsciousness… and, when he woke up, he knew every word in his spelling text by heart.

That was the bizarre origin story of Edgar Cayce – later known as the “Sleeping Prophet” and the “next Nostradamus” – who over the next 50 years would go on to deliver some 14,000 prophecies after communicating with angelic beings in a deep trance-like state. 

In 1925, Cayce’s angelic “spirit guides” predicted the stock market crash of 1929… in 1935, they warned him about the start of World War II… and over the years, they also dispensed medical advice for a variety of ailments: usually fairly common-sense remedies like fresh air, massages, and beef broth.

However, the spirit guides were particularly pushy about one unorthodox remedy, which they mentioned, through Cayce, almost 900 times: the Violet Ray Machine. 

The Violet Ray was a quack-science version of a radio-frequency (“RF”) device that delivers low doses of electric current to targeted sources. The original device is known as the Tesla coil – a scientific curiosity invented in the 1890s by scientist Nikola Tesla in pursuit of his longtime dream to generate “wireless power.”

The coil proved unreliable for Tesla’s purposes, but starting around 1915 – when the parts for these machines became easily portable – a cottage industry sprang up around using small amounts of electrical current to “cure” every condition imaginable. The Violet Ray – packaged in a horror-movie-looking suitcase – featured a variety of attachments to apply tiny shocks to whatever part of the body bothered you most.

Edgar Cayce’s angels recommended liberal application of the Violet Ray, for everything from arthritis to glandular problems to demonic possession. As word spread about the fashionable new “cure,” women snatched up electrode wands to cure hair loss, get rid of gray hair, and smooth out their wrinkles. And by 1942, comic book heroine Wonder Woman got her own “Purple Ray” machine – just in time to zap her dead love interest back to life with its magical beam.  

Starting in the 1940s, through, a series of lawsuits for false advertising and malpractice began to catch up with the manufacturers of the Violet Ray. The craze eventually ended in 1951 (six years after Edgar Cayce’s death) when the last purple-suitcase maker went out of business. 

But in the meantime, the legitimate medical establishment had quietly picked up RF treatment – starting in the late 1920s, when urologist Edwin Beer took home a prestigious award for using targeted electric current to shrink benign bladder tumors.

By the ’90s, RF had come into its own as a way to eliminate a variety of tumors. In this procedure, doctors insert a thin, needle-like probe through the skin directly into a tumor mass. Radio waves emitted from the probe cause nearby tumor cells to overheat and die, with minimal impact on the surrounding healthy cells. These RF-based treatments were just as effective as surgical tumor removal, with a success rate ranging from 66% to 95%. And they sidestepped lengthy recovery times and scarring – allowing patients to resume business as usual 24 hours after the procedure.

Then the skincare experts sat up and took notice.

In the early 2000s, medical researchers discovered that radio-wave frequency can also promote the growth of new collagen skin cells, which give skin its strength and elasticity. This gave rise to an entire industry of RF-based medical devices for skin rejuvenation procedures. Over the last decade, this industry has become one of the fastest-growing areas of medical technology, with sales growth exceeding 600%. That’s the industry we’re about to explore in this issue.

It almost sounds like the Violet Ray all over again.

Who knows… perhaps Edgar Cayce was “the next Nostradamus” after all.

A Wonderful Business at a Bargain-Basement Price 

Today’s recommendation is the global leader in RF-based cosmetic devices. This company’s patented technology transforms radio waves into heat energy, which enables powerful treatment options for things like skin tightening and fat reduction. 

The company has grown its revenues at a compounded annual growth rate exceeding 50% over the last five years. During that period, it has generated an average of 40% free cash flow (“FCF”) margins, and 49% returns on equity (“ROE”). It’s one of the most profitable and capital efficient businesses you’ll find anywhere in the public markets. 

The company sells its patented devices to doctors and medical practices around the world, providing them with a source of high-margin cosmetic procedures. But the ultimate end user is the beauty-focused consumer who pays top dollar for these enhancements. The transformational cosmetic improvements from this company’s devices have led to rave reviews from some of the world’s most high-profile celebrities. 

The management team behind today’s recommendation has led the development of this booming new market for the last 25 years. By delivering products with best-in-class technology and clinical outcomes, it has created the undisputed global leader in RF-based cosmetic devices. 

The company’s founder-led management has skin in the game – no pun intended – owning roughly 8% of the shares outstanding. Management runs the business conservatively, with a pristine balance sheet that includes a net cash balance equal to 30% of the total enterprise value (“EV”).  

Normally, a rapidly-growing business with a dominant competitive position and world-class profitability would command a premium valuation. But due to a series of short-term macroeconomic obstacles, the business currently trades at a record low valuation and a substantial discount to the overall stock market. 

This has created a rare opportunity to buy a wonderful business at a wonderful price. Today, we’ll show how investors could potentially realize gains of 500% or more from this business through 2030.