There are several obvious cases that would cause us to sell. The easy one is that we'll almost certainly sell if a company suspends its dividend. That would cause the holding to unequivocally violate our fundamental requirement for ownership. Similarly, we'd be very likely to sell if a company cuts its dividend, as we'd consider that to be a very ominous sign. Another catalyst that could go hand in hand with a negative dividend change would be a material breakdown in the business case that motivated us to buy the company. This could mean that we simply were wrong and have finally come around to that position, or that there was a material change. An example of such a change would be BP's recent oil spill troubles. Certainly, there are arguments for and against investing in BP over the last few months; what is inarguable is that the financial picture for the company changed drastically in a short period of time. That would clearly be cause for re-evaluation on our part.

The final reason that we would consider selling a significant position is a run up in the price of the stock. This is a pretty standard consideration in straight value investing: if a stock is trading for considerably more than one's calculated intrinsic value, it may be time to pare down the position. Many value investors bail out at or even prior to the point when market prices match intrinsic value. We view things a bit differently in the case of the Camelback Fund. If we've been able to buy a strong, dividend-paying company for a lot less than its intrinsic value, and the market has subsequently recognized the mispricing and closed the gap, we'll probably hold on a bit longer than a strict value investor because we like fortified companies that pay a healthy dividend. However, there comes a time when the prospect of a significant price decline and the likelihood of more attractive investment opportunities make a sell decision obvious. An example of this is a fertilizer company that dropped approximately 45% between March and June, when I bought it for myself and earmarked it for the Camelback Fund. Before the fund launched, it had already gained back more than 50%, and was right around intrinsic value. It consequently didn't make it into the fund's portfolio, but would now be a candidate for sale if it had.