When To Take Profits?

I should probably define an exit price every time I buy an individual stock. Because I never know when to sell.

I buy stocks of individual companies because I think they are undervalued. I look at the money they are making, their revenues going up to the right, and their free cash flow, and decide the stock market sells the shares at a discount for no reason.

So I buy these companies, and the stock price goes up. Then what?

When do I sell? What is my trigger to get out of them?

What can happen, of course, is that the stock then falls after rising. I could have gotten out, but I missed my opportunity. And then, I need to decide whether to wait for the stock to go back up or exit at a lower profit.

True North Commercial Properties

I face this dilemma with True North (TNT-UN.TO). True North is a REIT, and the stock had been hammered. I looked at the last quarterly report and decided that the assets that they owned were mostly all rented. And their tenants were solid.

So I bought the stock, and in less than a month it is up 22%. (Update: Now 41%! Good thing I didn’t sell.)

So this proves it was undervalued when I bought it. Now, what should I do?

A) Sell it at a 15% profit in 30 days

B) Hold it for another year or two while interest rates come back down

C) Hold it until management reinstates the monthly distribution (6 months)

I think some of the fear has left the real estate sector since the Fed discussed cutting interest rates in 2024. When they start cutting rates, perhaps more of the fear will leave, and real estate might enter a bull phase again. So, I think I will hold TNT for a bit longer. The risk of losing money on this stock from where I bought it is very low.

American Express

American Express is another example. I bought it three months ago, and it’s up 11%. It wasn’t even a couple of weeks ago it was in the red for me!

Amex is the type of company I can hold for years, though. They’re not going anywhere. They make incredible profits. I am not rushing to sell it, but AXP is up. And I could sell it if I thought it was overpriced.

So basically, the dilemma with buying individual stocks is that I use cash flow and valuation to buy them but don’t have any process for continuing to evaluate their fair value over time. Or should I even worry about it? Buy stocks at a discount and keep them forever?

This could be part of my buy-and-hold forever portfolio. Entering these solid companies at decent prices is a good strategy.