Ann: Quarterly Activities/Appendix 4C Cash Flow Report, page-96

Today, I got a letter from Link Markets (and my mind goes: Well, what's this about?). It was a chess holding statement and it said: Final Holding: 0
of HLF.

What a journey it was! People easily say "lesson learned".

But what have I learned? - and this is an effort to list honestly what I did wrong:

• I gave KTD / HLF management too much (way too much) credibility for what they are worth.
• Operating in a low margin / contract business is a very (I think too hard) or too difficult proposition at least for this company. I massively under-estimated the difficulties HLF is facing.
• If a fund manager and major holder (i.e. position on the board) leaves, the small investor should leave too. Regardless!
• I will be reluctant to ever invest into a business that is not yet EBITDA positive (credits to Transversal).
• I will limit exposure to these 'punting companies' to 3% of my portfolio.
• Although the Mr. Market is not always right, yet, over the period of a life as an investor it will be financially better to follow the market than against.
• In the life of KTD / HLF, there has always been for every setback a kind of "acceptable or plausible explanation", usually put forward by TTT and sometimes by T.E.P. Often very detailed and on the spot. It has to be said though, that good explanations for disappointments do not make for good investments. Here are a few examples:

1) Debtors are in arrears, but the majority of them have now paid. Well explained - but still pretty bad news
2) THM is under-performing, but this is just a result of 'seasonality'
4) This 4C is a bit of a disappointment, but the next one will be better. Kind of a mantra, and repeated all the time.
5) T/O growth financed by capital erosion, and when that is not enough, then by debt is not a good proposition for shareholder value.
3) The acquisition of THM was uncannily cheap (valuation wise). There would have been a reason for it - since the institutional investor (Long
Table) did not buy it; they sold out at 10 cents per share

• Do not invest or punt where the "macro-situation" is against the fortunes of a company; such as COVID, fickleness of establishing of your own brands, deterioration of Australia / China relations, rising interest rates.
• Be wary of a company with poorly executed investor relations communications or investor relations track record.

... I could go on; but I am going to have dinner early ...

All the best to everyone.