Selling a position (in tranches or in entirety) is possibly the hardest decision for any investor, including myself.
While we all might have frameworks for the same, I found this article quite interesting.
I like this approach from the article:
While there’s tremendous value in learning about a small set of companies over many years, the lifeblood of an analyst is in finding new ideas. Even if it’s to stretch the imagination and learn about new competitors, business models, etc., a passionate investor should always be turning over rocks.
However, when a new idea gets interesting, you wonder if it should replace an existing position. But which one?
The longer you hold onto a successful position, the more likely you will place a halo on it and not want to sell. Conversely, you will likely resist taking the loss with an underperforming position, hoping it will at least get back to break even. These biases are obstacles to swapping out an existing idea for a new and better one.
To remove some emotion from the equation, quantify your qualitative judgments about each company. Rank characteristics like moat, management, and financial strength relative to your other holdings. If a new idea has better rankings than one treading water at the bottom, the bottom rank is the one to go.
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