I find selling a lot harder than buying.
Buying is usually pretty straightforward. I can look at a business, estimate a range of outcomes, compare that to the price and decide whether I'm being paid enough.
Selling is messier because now I have history with the position.
I’ve sold stocks before and watched them keep rising. That doesn’t necessarily mean the sale was a mistake, but it sure feels like one. And once you’ve felt that a few times, it becomes another thing you’re trying to avoid when you sell.
The stock may be up a lot. It may be down a lot. I may still like the company. I may have been right about the original thesis. None of that answers the question I actually care about: from today's price, is this the best place for the money?
If the expected return has fallen, I want to know why. Did the stock simply run ahead of the business? Is the company going through something temporary? Has the earning power actually been damaged? Is the thesis just taking longer, or was I wrong about it?
A stock dropping below my return hurdle doesn't automatically make me sell. A stock going above my estimate of fair value doesn't automatically make me sell either. The size of the gap matters, the reason for it matters, and whether I have a better place for the money matters.
That's what makes selling harder for me. Finding something undervalued is mostly an underwriting problem. Selling means deciding whether new evidence has changed the business, the valuation, or both, while trying not to let my cost basis or the fact that I already own it get in the way.
The easiest question to ask is probably: would I buy it today if I didn't already own it?
It's a useful question. Just not enough by itself.