When to Sell a Core Holding

On the March 9 episode of The Morning Filter_, _David Sekeraand Susan Dziubinski discuss when investors should sell core stocks. Here is an excerpt from the show.

How Do You Know When It’s Time to Sell?

**Susan Dziubinski: **Well, it is time for our question of the week. Our question this week is from longtime viewer Danny, and I’m going to paraphrase Danny’s question a little bit. He wonders if you buy a core holding when it’s really undervalued and then it hits fairly valued, which is 3 stars, pretty quickly, would it be wise to take some profits at 3 stars or maintain that position and then wait until it goes to 2 stars before scaling back? And again, this would be a core holding.

**David Sekera: **Yeah, and I mean, that’s a great question, to some degree, a little impossible to answer. It always comes down to a matter of valuation, but also you need to kind of understand what your own risk profile is and what your portfolio construction is. So, even if it’s a core holding, if it’s getting to be too far into overvalued territory, especially if it’s now become a larger and larger position of your overall portfolio, and you’re now overweight in that name, yeah, always a good time to take a little bit of profit off the table. Again, just like I like to layer into positions, I also like to scale out of position so you don’t have to sell the entire position, you can take some profit, you can keep some. That way, if you have more momentum—again, you always want to let your winners run to some degree—but you also then have the ability to have that dry powder and then be able to repurchase it if that stock sells off.

Now, when I think about that star rating system, again, that’s our risk-adjusted fair value range, so for a 3-star-rated stock, that means it’s in the range we consider to be fairly valued. So for long-term investors, you should expect to earn, based on our assumptions, kind of that cost of equity type of return. Absolutely nothing wrong with that, especially for a core holding. Typically, the cost of equity for those type of companies is 8%-9%. So typically, I’d say it’s once something hits 2 stars, typically where I consider to start maybe trimming some. And of course, when it gets into 1 star, that’s a good spot to sell some more. And the further gets into 1-star territory, you want to continue to keep cutting your exposure to that stock.

I think the hardest part is knowing when to cut losses to the downside, when a stock starts to sell off, where, for lack of a better way to put it, when we’re wrong in our valuations. I mean, generally, I think our track record is pretty good over the long term, and it’s pretty good if you look at our overall coverage. But we’re always going to have instances where we’re wrong. And then sometimes, even when we’re right, we might be wrong for a while. Just based on how much market momentum there might be in some of these stocks. So, again, I think you need to have your own informed view, based on your own analysis. But always watch for those cases where the company fundamentals are weakening and the stock is selling off, especially if we’re cutting our fair values to the downside. Those would be the one where I try and look to cut our losses before the stock has too much more downward momentum.

What Core Stocks Are and Why Every Portfolio Needs Them

Here’s how investors can find their ‘ride-or-die’ investments that will help stabilize their portfolios, even when the market fluctuates.

What Young Stock Investors Should Know

Including how to sell a stock.

Subscribe to The Morning Filter on Apple Podcasts_, or wherever you get your podcasts, and keep up with the latest research from hosts Susan Dziubinski and David Sekera on Morningstar.com._

		3 Stocks to Sell and 3 Stocks to Buy Instead

		Plus, how to position your stock portfolio today.
	





			41m 22s
		 Mar 9, 2026

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