Selling a good stock is just as important as buying it; when purchasing a stock, we first conduct a fundamental analysis and determine how much we are willing to pay for its "story," right? We examine its monopolistic structure and its position within the sector, and we try to forecast its future market share. After that, we look at valuation multiples—specifically P/E, Forward P/E, and PEG ratios for growth stocks. However, for cybersecurity and SaaS companies, there is an additional factor I consider—one that is crucial to me: EV/FCF or EV/OCF multiples.
I analyzed all of these factors, identified technical levels, and decided to buy at specific price points—essentially applying a Dollar-Cost Averaging (DCA) strategy. I got lucky and managed to buy the stock across three or four price tiers. Then, the market began to price in the stock's story. The share price started to rise and performed exceptionally well. My profit exceeded 50%, and when the earnings report was released—showing strong figures and upward revisions to future guidance by management—the stock jumped another 20% almost instantly. My profit is now over 70%. It turned out to be a fantastic investment. Some investors, seeing this kind of gain, close out their entire position and move on. That isn't really my style. Why? Because I invested in the company believing it would improve, and it did—my thesis was correct. Why would I sell off the whole position when I was right? Did I find a better opportunity? No. Is there a problem with the balance sheet? No. So, why close the position? Instead, I take partial profits.
When it comes to taking profits, the only thing I look at is the technical outlook; I pull up the chart, identify key resistance levels, and usually set separate alerts for 2–3% below and 2–3% above those resistance points. When the alarm goes off, I check the situation; if the stock is struggling at the resistance level, I sell a portion. However, if it breaks through the resistance, I wait and observe the daily close; if there are no issues and the stock's momentum is strong, I don't sell. Why stop a galloping horse? It will stop on its own once it gets tired. Clear examples of this are CPU and cybersecurity companies; they have very strong momentum, but their valuations are also very high. In such cases, I set a stop-loss on the portion of shares I want to take profit on and update it daily; it doesn't matter if the stock goes up or down—the difference at the point of stopping out will roughly be only 2–3%.
As you can see, as long as my investment thesis holds—and assuming I’m buying via DCA—I also take profits at specific levels when the stock rises, essentially reversing the DCA process while applying the same logic. Once I’ve withdrawn my initial capital, I don't micromanage the stock; I give it more breathing room—unless, of course, there’s a major shift. I also have a rule: if I’ve allocated 10% of my portfolio to $AVGO (Broadcom)—even after withdrawing the initial capital—I take profits on a weekly basis whenever it exceeds that 10% mark; I try my best not to let it grow beyond that allocation. The reason is simple: I structure my portfolio based on risk, and the maximum risk I’m willing to take on a single stock is 10%; anything more than that becomes a burden. I’d rather let the stock "rest" than wear myself out worrying about it.
Most of the stocks in my portfolio remain constant; if my thesis is correct, I add more when the price drops and take profits when it rises. The only time I make a change is when I find a better opportunity—essentially swapping players. For instance, selling $NBIS (Nebius) and using the proceeds to buy $ALAB (Astera Labs) and $CRDO (Credo) at $100. But credit where credit is due: $NEBIUS also saw a strong rally, though not quite to the same extent as the others. Another example would be exiting $CEG (Constellation Energy) and moving into $BE (Bloom Energy) while it was trading at the 200-day SMA level.
The point is, with long-term investments, you either exit the stock when a better opportunity arises or when the original thesis no longer holds. When taking profits, the approach involves scaling out while keeping an eye on technical resistance levels. Right or wrong, this is the method I use, and it has worked successfully so far.
