Excessive Valuation

For each company in our portfolio, we calculate a "range of fair value". If the price of a company's shares approaches the upper end of that range for a given business, we may sell part or all of that position.

Deteriorating Fundamentals

If we anticipate that factors such as market saturation, increased competition, product obsolescence, or mismanagement are likely to erode the long-term economics of a company, we will sell part or all of the position to reflect our heightened perception of risk.

We always attempt to distinguish between short-term earnings fluctuations from events that may permanently impair a business model.

Detrimental Change in Management or Business Focus

Management can have a direct impact on the value of a business in the way they allocate capital. We will sell a portfolio holding if management demonstrates an inability or unwillingness to make sensible capital allocation decisions on behalf of shareholders.

Misinformation

We will sell a portfolio holding if we believe we have received misleading information from company management, either in our conversations or in the company's financial statements.