when should we sell stocks that we hold?

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First, this is on the assumption that we have qualified the business in their financials, moat (competitive advantages in the industry), market outlook including total addressable market (TAM), etc

some signs of concern include: <using Annual performance as reference> 
  • Share dilution instead of share buybacks, 
  • Top management changes, 
  • Insider sales,
  • FCF decrease, 
  • debt increase,
  • Revenue decline, 
  • Net income decline, 
  • Loss of moat, 
  • Disruptive technologies, 
  • Built-up of inventories, 
  • Issue of dividends, 
  • R&D spending without getting a moat.  
Fundamentally, the financials and market outlook should remain sound and the company on track to hit the targets that they have set. Recovery from crises like "covid" is also a good indicator of the moat. $MSFT's market cap grew 50% in 2021 - so  Microsoft definitely has demonstrated a strong moat.

S curve of business growth from rocketsource.co 

You can find more details about "S Curve" in the article by Rocketsource.co. 

We will also need to put the business life cycle as part of the considerations.  Companies' financials have different focuses in different parts of their life cycle.  From the start to the growth stage, they could be spending much on research & development & marketing and could suffer losses at this stage.  From growth to scale, there could be a CAPEX outlay but we should expect the financials to improve over time.  They may need constant funding and thus, face constant stock dilution.  

Personally, I prefer to invest in the company when its books have "demonstrated" net income, FCF and decreasing liabilities.  I find it hard to buy, hoping that the management will deliver their promises someday. 

There are companies with great solutions which did not make it as they simply run out of money.  Thus, the Free Cash Flow (FCF) is an important consideration, more important than revenue or profits (net income).  You can be making profits but not have the funds to run the day to day operations.  In the end, the business could face bankruptcy and be forced to put up for sales.

Top20 companies of S&P500 in 2008 & 2018

Top companies who have filed for bankruptcy in 2020 from Fortune.com

We see some notable changes and bankruptcies from the 2 lists above.  I will rather be later to invest (making lesser profits) than to invest earlier (with potentially making more losses).

Rule #1 - never lose money

After we invested in the companies, let us continue our due diligence to check on their annual and quarterly reports.  These will help us to decide on buying, holding or selling.  

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