Partnership Letter 2022

Principled Capital Members,

Performance Summary (unaudited):

Jan 1st 2022 to Dec 31st 2022

S&P 500 (SPX): -19.44%

Nasdaq (COMP): -32.51%

Principled Capital LLC: -45.22%

Fund inception to Dec 31st 2022

S&P 500 (SPX): -15.22%

Nasdaq (COMP): -30.68%

Principled Capital LLC: -53.41%

The fund became fully funded on August 31st 2021 and since then has been fully deployed into the market. Since inception to the close of 2022, the fund has underperformed relative to both the S&P 500 and Nasdaq by approx 38% and 23% respectively.

Partnership Letter:

Last year I talked about buying companies below their intrinsic value and selling them when they appear well above their intrinsic value. At inception of the fund I attempted to purchase great businesses below their intrinsic value, but unfortunately 2022 has shown I could have purchased them much cheaper... I still believe we hold great investments for the long term, and my only regret is not being more patient when initially purchasing these companies. Of course hindsight is 20/20 and if I were to go back in time, I doubt I would have behaved much differently. They say price is what you pay, value is what you get, I believe the fund still holds great value, it is just that we could have paid a cheaper price.

It is important to remember that due to the strategy this fund employs, it does not do much good evaluating its performance for any timeframe under 5 years. There are many macro factors that can have effects on price in the short term (ukraine war, covid lockdowns, fed rate increases, etc). We attempt to buy a small number of great investments that we feel will grow for the next 20 years or more, our long term upside is great, but at the cost of short term pain. This is in sharp contrast to most funds that buy hundreds of businesses both good and bad to mitigate short term pain, at the cost of long term gain. Our strategy goes against the majority, however we believe that is the only way to win in investing.

I do acknowledge these interim results do not feel good, but having years such as these are inevitable in stock market investing (I just wish it wouldn't have happened at the start of a new fund). I greatly appreciate all the trust you have placed in me and still remain confident we are abiding by the correct principles to manage your money responsibly in the long run. If you have any questions or concerns feel free to reach out to me.

Updates:

- I attended and spoke at a conference in Dubai this past November. It was a great experience and was given the opportunity to learn and discuss investment ideas from many influential fund managers in the value investing community. I also was given the chance to present on Bitcoin and how investors can attempt to approach and think about it as an undervalued investment. Attached are the slides if you are interested

Logistics:

I have completed preparing each partner's K1s and will be emailing each of you separately with those. You will notice the loss is not 53%, this is because you only pay taxes on realized loss/gains. We did some reallocations of our stocks as some dropped more drastically than others which explains our motivation for selling.

Thanks!

Paul Holtfrerich

Managing Partner, Principled Capital LLC