My Investing Journey Begins - Holista Colltech (HCT)

‘If you ignore the warning signs, a tragedy awaits you.’ Cory J Hernoon

In April 2020 after having spent a bit over a year building up a portfolio of ETFs I decided I would start investing a small amount directly into companies I had selected. Given that the big end of the market was well and truly covered by my collection of ETFs I thought my efforts would be best spent searching through microcap companies. Without having established why or how I would decide on what I was buying I dove right in and after seeing some “lists” of companies that could benefit from the global pandemic that was kicking off I landed on HCT.

Lesson 1 (Very well covered but easily ignored) - Have an investing policy for your investing style

Holista Colltech is a natural wellness company that develops natural ingredients and low GI products, but was also making news on announcements of a natural sanitiser that was effective against viruses and demand was increasing.

The extent of my thesis was:  

1. Hand sanitiser was running off the shelves and with how much sanitising people were doing a natural alternative would be appreciated by the market.  
2. Given how much the pandemic was in the news it would provide tailwinds for the company during the market recovery that was taking place and HCT was on the rise off recent lows.
3. Other products in HCTs line were having positive results or first orders.

Entry Trade -06-04-2020 - $0.13

If I had looked a bit deeper at that point in time, the first warning signs were already there on how the company and management operated. I also really hadn’t given the company fundamentals much consideration to understand the price I was paying. ( I will save some of those lessons for another company)

Lesson 2 - Pay close attention to anything negative a company is forced to announce

I also really only took all these announcements at face value which leads onto the next takeaway, one which I still need to be aware of as it can be easily overlooked when pressed for time or energy. Questions that could have been asked; What does the company stand to make from 150,000 bottles? How much production / distribution capacity does the company have and how much will it cost to expand? Are there similar products on the market? What will happen to sales after the short term boost provided by the pandemic?

Lesson 3 - Employ second order thinking. Don’t stop at the first conclusion. 

https://www.mindtools.com/pages/article/howard-marks-higher-order-thinking.htm

I was blinded by early success with share price increases of over 50% and further positive announcements, that I continued to miss the signs for an exit from the unravelling of a company with no substance. Signs like multiple retraction / clarification announcements such as below.

The YouTube video in question should have been enough for me to question my investment in the company, even discarding the misleading statements, for promotional material it was budget to say the least.

Market Update 9th July 2020

These were followed by more ASX Query letters and poor results updates.

I finally made my exit from the company in August after a bumpy ride down from the initial highs and finally realising that I had bought into a company where management were unable to execute and were more focused on boosting share price than company growth. (Unfortunately I didn’t learn that lesson well enough)

Exit Trade - 05-08-2020 - $0.065  50% Loss

I have been wanting to reflect on some of my previous trades for some time now and being locked up with Covid is as good a time as any. I thought I would start a general forum area where everyone can share lessons and stories as it's useful to try and learn from other’s experiences. (Not all of these need to be tales of loss and despair either, there are also lessons in triumph)