I kind of agree, and I kind of don't. The tax bill is a known quantity, so all it is really doing is raising the sell hurdle to a degree, but not to an infinite degree.
If my tax bill is going to knock 20% off X capital (which is about as extreme as CGT gets, for an asset held >12 months), and if my stock is clearly overvalued by >40%, and I can cycle the proceeds into an opportunity that is clearly undervalued, the tax hurdle does not fundamentally change anything at all.
The difficulty perhaps comes more from the question of how overvalued the asset actually is. The issue, of course, is that a "high quality" stock that has been held for many years, is likely to be a "high moat" compounder, for which placing an upper limit on its value can be a difficult, and perhaps sometimes almost impossible, task [#].
But this difficulty does not arise from the tax issue. This dilemma would exist even if we lived in a tax free nirvana.
[#]: This of course invites another highly charged philosophical debate, about whether our notions of fair value have been unduly influenced by: (1) structural economic factors which may not exist going forward. (2) A willingness to assume that a long history of favorable economics specific to the business can persist indefinitely. (3) The reality that high multiple valuation imply value realisation decades into the future, and may thus be akin to crystal ball gazing. (4): etc.
(20min delay)