Yes, this may happen. That is why, when we buy a company, we have to factor in margin of safety. However, I would not sell if the company’s intrinsic value is still above its price. I would sell the stock only if I believe that the economics of the business has permanently changed and that company’s ROE will not recover back to above 15%. Moreover, I must be able to find a better opportunity to employ my funds should I sell of my holdings.
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