A reader asked the following question in the comments:

How do Buffett and Fisher judge the timing and price of selling?

Regarding how Buffett judges the timing and price of selling, I briefly shared with everyone during last weekend's online exchange.

This is a key idea repeatedly mentioned by these two predecessors in their speeches and writings, and I think it is also the content that has impressed me the most since I have been reading their works recently.

The investment approach of these two predecessors is fundamentally based on long-term investment, so when considering their actions, they always look at the long-term value of an investment target and believe that the growth of value is the core driver of price increase.

Under this fundamental strategy, all their decisions focus on the long-term factors that can truly increase value, and they do not pay attention to factors that are irrelevant to value growth.

For example, market conditions, macro policies (such as the Fed's monetary policy) are considered by them to have no relation to the growth of intrinsic value, and they believe that these factors are speculative and unpredictable.

Of course, if these factors greatly distort the price of the investment target, they would welcome it and take advantage of such market distortions.

What does this mean?

For example, if they hold Apple stock with a current price of $500, and they believe its intrinsic value is also $500.

But if the market suddenly speculates that the Fed will definitely raise interest rates tomorrow, in this case, some traders may think that once the interest rate is raised, the stock market may plummet, so they would quickly sell Apple today and buy it back when it falls to a low point; or another group of traders may think that the news has already been factored in, and if the interest rate is indeed raised, the stock market will soar, so they would quickly buy today.

They, however, would not speculate on how the market will move after the news is confirmed to decide on today's actions.

But if the behavior of traders in the market causes the price of Apple to reach an extremely extreme condition, such as the stock price of Apple suddenly soaring to $5000, then in this case, they would likely sell because this price is obviously much higher than its intrinsic value; or if the stock price of Apple suddenly plummets to $50, then they would likely buy because this price is much lower than its intrinsic value.

As for the specific criteria for judging the timing of selling and the selling price, Buffett's explanation is very specific, while Fisher's is more abstract.

Mr. Buffett has mentioned the following criteria:

• If the company needs funds for essential expenses (such as Geico Insurance needing funds for claims), he would sell the stock;
• If he believes that the price of a stock has far exceeded its intrinsic value, he may (but not necessarily) sell the stock;
• If he finds another more profitable transaction (such as finding a cheaper value stock, or finding a company with a very good overall acquisition), he would sell the stock.

Some time ago, many people online said that Buffett had sold at the peak of the US stock market several times, explaining this behavior as his judgment of the future market trend of the US stock market. In my opinion, this behavior is one or more of the three points mentioned above.

Fisher's approach is:

• If the fundamentals of the company (management, operations, research and development, etc.) change, he would sell the stock;
• If he finds a more worthwhile company to buy, he would sell the stock.

Apart from this, he hardly sells.

Fisher even believes that if he holds a good stock, even if the price of the stock rises "excessively" in the short term, he would not sell, because he believes that the future price of this good stock will probably exceed the current "excessive" price again.

For example, he has held Procter & Gamble for over 10 years, Motorola stock for 30 years, and Texas Instruments for 40 years…

Whether the operations of these predecessors are suitable for us is subjective. But I believe the logic and mindset behind them are worth learning from and emulating.

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