A memorable Seinfeld episode has the comedian giving a clerk at a car rental agency a piece of his mind, when the agency had taken his reservation but had not actually reserved a car for him to drive off in. "Anyone can just take a reservation", he says while making the offhand gesture of writing something down.
Buy-and-hold investing is just like that, in a way: Anyone can just buy securities. The holding (or as Tom Petty put it, the waiting) really is the hardest part.
Take for example shares of Bank of America (NYSE:BAC), UST Inc. (NYSEARCA:UST), Wells Fargo (NYSE:WFC) and Mattel (NASDAQ:MAT), all of which I own and all of which are up by better than 20% off their lows. Every investor gets nervous when he or she is sitting on unrealized gains. That's understandable. But would you sell them at this point?
I think the answer is no. I think this is a clear case of letting the winners run. If you have a stock in your portfolio that has gone up by such a margin, that it now constitutes too much of your portfolio (say, 8-10%), by all means sell one half of your position. But for those that still make reasonable position-size sense, you want to just sit tight.
Of course it doesn't say anywhere in any bible that buy-and-hold means hold it till you die or retire or go on a world cruise. Warren Buffet was wrong not to sell some Coke (NYSE:KO) for $100 back in the irrational exuberance days. But that doesn't mean you should dump anything that goes up more than a certain percentage figure. That's a losing strategy.
The winning strategy is to sell only that which becomes truly expensive. The Dow in 2001 for (I think) 26 times earnings was expensive. Now it's not. BAC at 13 times earnings is not expensive even if you bought it for the 52-week-low price of 41. It just isn't.
What I would use (and in fact do use) as an additional confirmation when to sell an overpriced dividend payer, is simply the dividend yield. If you bought a stock yielding 5% and it has gone up so much so fast, that it yields 3%, you might want to look into selling out, but only if the price move has not been accompanied by a simultaneous positive change in the fundamentals .
Full Disclosure: Author was long BAC,UST,MAT,WFC at the time of writing