Q1 2026 Letter

Dear partners,

Thank you for your continued trust and support; you are the best partners I could ask for. If you know anyone who would be a good fit for the fund, feel free to forward on this letter as I think the valuations of the companies in our wheelhouse look attractive.

I’ll get straight to the point, it was an awful quarter. I made quite a few mistakes including underweighting just how strongly the AI narrative would affect anything in its wake. But the last thing I want to do when performance is not good is bury the bad news so let’s talk about two big losers in the portfolio. One tough thing about investing is balancing the short and long term. It’s obvious the long term is all that matters but the path you take to get there can vastly change the odds you reach your destination. I think that’s what people mean when they obsess over metrics like beta. If your portfolio is so volatile that you get scared out at the wrong time, that volatility crystallizes into a permanent loss. However, if you know what you own and are highly confident in your own destination analysis, the volatility becomes an opportunity. The difference is conviction.

Yet conviction is a double edged sword because we are fallible. A more helpful way to view investing is a probabilistic endeavor where the odds are changing based on new information. If your estimated odds of being right are still high even though the stock is selling off, then it’s theoretically a better value. In this spirit, I want to briefly discuss two companies that have been losers in the portfolio thus far but I think have a good chance of becoming vastly larger companies.

The first one is Duolingo. We shared our initial thesis last quarter but the price has only plummeted. Essentially, there is a short term and a long term risk but I believe they are being conflated. The short term risk is that subscription bookings are decelerating as the company has pulled back on its unhinged marketing tactics and overmonetized its customer base while the long-term AI risk looms. It seems like investors are worried that AI is already slowing revenue but I’m making the bet this isn’t the case. In fact, AI will enable better learning outcomes which the company is leaning into. User growth will be lumpy and I actually think it could dip and accelerate as more features like ‘Explain My Answer’ become free. Some companies aren’t able to re-accelerate growth once it slows down whereas others have multiple S-curves they can stack on top of each other. The market seems to think Duolingo is the former but I think it’s the latter as they harness the power of AI to improve their current courses and add other subject areas. If daily user growth dips below 20% and stays there for at least six months, I would have to seriously consider that my thesis is incorrect. In one year, if there are still no signs of re-acceleration, that new information would likely change my confidence in the long-term destination of the company. That 20% and 12 month period is somewhat arbitrary but it’s based on the price we paid for the company and the timeline I think is reasonable based on how quickly AI is moving and what management has outlined. I like to put a financial metric tied to a qualitative thesis as it can be easy to have thesis drift and not be intellectually honest. If you’re staring at the pre-committed numbers, it’s hard to wiggle your way out of that. That’s the tension between the short and long term. The long term is just a bunch of short terms strung together. If the short terms don’t show any evidence your long term thesis is intact, it’s likely the right decision is to move on. Now, this has nothing to do with the stock price – it’s all about the underlying fundamentals. The stock price may fool you that it “knows something” and other times, other investors actually do know something you don’t. That’s why I always say the key tension for investing is conviction and humility. Too much conviction and you won’t survive in the long run. And too much humility and your returns likely won’t be anything to write home about (I’m sort of using humility as a catch-all for paranoia and second-guessing your decision-making. True humility, I don’t think you can have too much of). At the same time, I think there is a very real scenario where Duolingo delivers on its supertutor-in-your-pocket vision and 100 million global paid subs at $100/year and 30% FCF margins results in $3 billion in annual free cash flow vs. the current enterprise value of $3.2 billion.

The other loser so far is Ondo Plc in the UK. The company’s main product is called the LeakBot which they distribute through home insurers. The technology, which has a defensible patent, monitors the temperature of a residential main water line and the ambient air temperature surrounding the pipe. When no water is being used in the house for an extended period (like overnight), the water inside the pipe should naturally warm up and equalize with the room temperature. A slow leak, even one as small as five ml per minute, constantly draws in new water from the underground supply, which is colder than the indoor air. This constant flow prevents the pipe from ever warming up completely. The LeakBot uses algorithms that look for persistent, small temperature differences that repeat during "quiet" times. The company was started in the UK, where main water lines are actually inside the house due to the potential for freezing. The company is currently working on a version of the LeakBot that works with exterior water mains, but it should take about a year to commercialize.

The incidence rate of a non-weather-related water claim for home insurance companies is between 1% and 1.5%, and the average cost associated with those claims is roughly $15,000. Using just 1%, the expected loss for the insurer is about $150 per year. In the US, for a single-family home, the average premium is about $2,500 per year, so these leaks represent about 6% of premiums in the home insurance industry. So when a home insurance company can pay $60 per year (the cost of LeakBot monitoring) to detect these leaks, the return on investment is quite significant. At a 1% incidence rate, you can see that the ROI is 150%. The break-even point, where it doesn't really make sense for the home insurer to use LeakBot, is an incidence rate of below 0.4%. But when you look at the data across many different states and many different insurers, the incidence rate is at least 1%, even when you exclude roof leaks and non-pipe-related leaks.

Another key thing to point out is that the company is trying to build out its own plumber network. The NPS scores for the LeakBot from homeowners are in the high 80’s because they can install the device on their main water line in five minutes and then a plumber can come fix any pressurized leaks they have in their house – all for free. And the home insurance companies can save a boatload on water-related claims. It’s the ultimate win-win-win. However, to send the devices to homeowners for free and build out a plumber network in advance takes a lot of money! The company is currently burning cash and will likely need to do another large raise at some point. Almost every losing investment I’ve ever had has been a cash burning company. So why do I think this one will be different? Well, I’ve spent an insane amount of time understanding the granular unit economics and I think they work (hopefully the thesis is still on track next quarter and I can dive into the nitty gritty in the next letter). Further, it’s one of those businesses that gets much stronger as it gets larger. As the plumber density grows, the cost per visit decreases and the ROI for the insurers improves as more visits means more tangible evidence the LeakBots are actually catching small leaks. You can envision a scenario where LeakBots are in 10 million homes across the US and Ondo has more than 1,000 plumbers on staff. That would be like 20% of the coverage compared to the plumbing giant, Roto-Rooter.

The short term is very dependent on getting to more than 300,000 registered customers as that is the breakeven point my math suggests. If that takes longer than a year, I would be hesitant that insurers are really seeing a strong ROI. That would be highly dependent on how many plumbers are in the field but management also doesn’t want to dilute shareholders too much. It’s a tricky balance but reflexivity is important here as it could get into a doom loop where a low share price means too much dilution to hire plumbers and therefore they can’t deliver high ROI to insurance partners which means depressed unit sales and the business can’t cover its fixed costs.

But there is also a clear scenario where 10 million homes means $600 million in revenue at 20% margins on a $28 million market cap. Both Duolingo and Ondo have clear paths to more than 10x returns, which don’t come around too often. However, the short term doesn’t look too pretty for either of them and we may have to adjust course depending on how the new data points look. We will do our best to not let thesis drift come into play but there is also a risk of not giving these sorts of companies enough leash as things always seem to take longer than you’d expect. That’s why position sizing is important and adding on the way up with improved data points can actually be a better risk-adjusted decision. 

Closing

I’m honored to have you as a partner. Thank you for your trust and support. It enables me to think long-term and will be our own competitive advantage. 

The stock market, like life, will have its ups and downs. All we can do is focus on what we can control and work hard to continually raise our standards. Our strategy is simple – hitch a ride to the world’s best entrepreneurs that are running the fastest-growing, highest-quality companies at the most attractive valuations we can find. Here’s to many more years of focusing on the inputs and letting the outputs take care of themselves. 

Sincerely, 

Ryan Reeves

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Performance Appendix

Annual Net Returns	Infuse Partners LP	S&P 500
2022*	-30.65%	-7.25%
2023	17.62%	26.27%
2024	89.63%	25.05%
2025	79.52%	17.89%
Q1 '26	-18.90%	-4.33%
Since inception	125.17%	66.16%
CAGR	24.95%	14.86%

* launched August 8, 2022

Quarterly Net Returns	Infuse Partners LP	S&P 500
Q3 ‘22	-10.85%	-13.25%
Q4 ‘22	-22.21%	7.56%
Q1 ‘23	10.06%	7.49%
Q2 ‘23	0.40%	8.74%
Q3 ‘23	-8.52%	-3.28%
Q4 ‘23	16.35%	11.69%
Q1 ‘24	31.15%	10.56%
Q2 ‘24	21.86%	4.29%
Q3 ‘24	6.23%	5.90%
Q4 ‘24	11.69%	2.41%
Q1 ‘25	-4.87%	-4.27%
Q2 ‘25	52.67%	10.94%
Q3 ‘25	33.24%	8.12%
Q4 ‘25	-7.23%	2.66%
Q1 '26	-18.90%	-4.33%
Since inception	125.17%	66.16%

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Disclosures

Infuse Asset Management LP (“Infuse”) is an investment management company to a fund that is in the business of buying and selling securities and other financial instruments. This information is provided for informational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell an interest in a private fund or any other security. An offer or solicitation of an investment in a private fund will only be made to accredited investors pursuant to a private placement memorandum and associated documents. 

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