Reaching the Midpoint and Sellingby Richard Pzena
When a stock reaches the midpoint of the [valuation] ranking, from cheapest to most expensive, we sell automatically. As a stock price goes up and becomes less cheap, we’ll want to hold less and trim it back as it’s going up, and we’re out when it reaches the midpoint. I arrived at that discipline because otherwise I would have no idea how to sell. It struck me that if you let your emotions dictate when to sell, you risk falling in love with companies that have been doing well and you ride them too long, and then something goes wrong. For me, having something systematic that says “this is cheap” or “this is fairly valued” is really, really important.