When does 'overvalued but still a good business' become a sell for you?
u/stockoscope ·
Reddit — r/ValueInvesting
· September 01, 2026 at 09:34
· ⬆ 15 pts
· 💬 41 comments
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AI Summary
Summary
Author asks a principle question: when does an excellent business that has become significantly overvalued become a sell?
Uses own PANW position as example: bought at $154, now $371 (+141%), believes it is overvalued, but taxes mean a 25% pullback is needed to make selling now worthwhile.
He lays out options — trim/sell, hedge with puts/collar, or do nothing — but does not state a decision; post is open-ended and speculative about process, not a specific recommendation.
Quality assessment: Not well-researched DD; it is a thoughtful valuation/strategy discussion with one concrete position but no actionable conclusion.
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Do you sell a winner that has become significantly overvalued, or hold if the business is still fine?
Example: I have a position in PANW, up 141% since April (bought at $154, now $371), and now significantly overvalued on my numbers. The obvious move is to sell, wait for a pullback, buy back cheaper. But if you factor in the tax I'd pay on the profit, the stock would need to fall around 25% for me to break even. And of course, it may not fall and may continue to run despite being overvalued. For context, it reports after the close tonight and the options market is pricing an 11% move.
So my options are
\- Trim or sell outright
\- Hedge with puts or a collar and keep the shares
\- Do nothing
What would you do?
What I'm actually trying to work out is the principle, not the ticker: at what point does a still fine business that has run too far become a sell for you?