What is Common Between an Airbus Pilot and Investors in Page Industries?

I once came across a piece on twitter which spoke about life and perspective, which I could completely relate to stock markets and investing.

After all psychology has more impact on investing outcomes than analysis.

As Warren Buffett puts it, "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ".

It's EQ (emotional quotient) which will help you make the big bucks in life.

So here is this beautiful but simple piece...

An Airbus 380 is on its way across the Atlantic. It flies consistently at 800 km/h at 35,000 ft when suddenly fighter jets appear.

The pilot of the fighter jet slows down, flies alongside the Airbus, and greets the pilot of the passenger plane by radio: "Airbus, boring long flight, isn't it? Now, have a look here!"

He rolls his jet on its back, accelerates, breaks through the sound barrier, rises rapidly to a dizzying height, and then swoops down almost to sea level in a breath-taking dive.

He loops back up next to the Airbus and asks, "Well, how was that

The Airbus pilot answers, "Very impressive, but watch this!"

The jet pilot watches the Airbus, but nothing happens. It continues to fly straight, at the same speed, at the same altitude with absolutely no change in its trajectory.

After 15 minutes, the Airbus pilot radios, "Well, how was that?

The confused, the jet pilot asks, "What did you do?"

The Airbus pilot laughs and says, "I got up, stretched my legs, walked to the back of the aircraft to use the washroom, then got a cup of coffee and a cake".

Well, in my opinion, this banter between the fighter jet pilot and the Airbus A380 pilot has many lessons for investors.

People these days keep on talking about doing things, about speed, about action.

Have you ever thought that inaction is probably as important as action?

Let me illustrate this in the context of the stock markets.

Page Industries, the maker of jockey innerwear gave a whopping 40% CAGR returns over the past 10 years (2011-2021 period).

The stock went up 20 times during the period. As an investor, all you had to do is buy and forget. And do nothing.

The stock during 2016-2021 went up by just 6% CAGR. That is lesser than to fixed deposit returns.

During that period, when the going was tough, all you had to do was cut the noise and go to sleep.

However, unfortunately human minds are not programmed to do nothing. After all your neighbour is earning higher returns on his small-cap stock. Your brother in law has just discovered a small-cap stock which doubled in less than a year and is expected to double in the next couple of years.

You on the other hand are embarrassed to tell people that your stock isn't doing anything.

I'm sure a lot of people will relate to the narrative that if a stock has already gone up by 5-10x, where's the juice left in it?

That was the narrative sold for Page Industries too.

The stock hit its life time high of Rs 51,050 yesterday, recouping all its underperformance. Just like the Airbus A 380 pilot, all you had to do was stretch your legs and do nothing.

No wonder investment is boring, if you want thrill, then maybe you should go to a casino.

Does that mean Buy and Forget is a right strategy for all stocks in your portfolio?

The clear answer is No.

Not all stocks in your portfolio have the brand power of Page Industries.

Buy and Forget applies only to consumer stocks with strong brands. You cannot buy and forget about a cyclical sector or a company which develops structural issues.

The reason the Page Industries stock price gave a mere FD return from 2016-2021 period was because its profits slowed down from FY19. In fact, it declined in FY20 and FY21.

Slowdown and Market Share Loss from FY19 to FY21

Page Industries	FY17	FY18	FY19	FY20	FY21
EPS (Rs)	239	311	353	308	305
Growth (%)		30%	14%	-13%	-1%

Source: BSE, Equitymaster

As they say the stock markets always discount events before they happen. So while the slowdown in numbers was reflected from FY19, the stock started underperforming a year ago.

My Take on Buy and Hold Forever

Strong brands like Jockey (Page Industries), Dominos (Jubilant Foods) or Tanishq (Titan) can be held for a long time, that too only if valuations are in check. When I say valuations in check, I mean valuation metrics like P/E ratio relative to ROE and ROCE.

Page Industries has always been an overvalued stock in terms of a PE ratio with its current PE ratio at 77x. However this is supported by its high ROE of 54% and ROCE of 68%.

Even companies like Titan and Jubilant Foods have consistently generated 24-25% ROE for their shareholders. Hence these stocks command high valuations.

Such companies can be considered a part of the the Buy and Hold type.

Please note when I say Buy and Hold it does not mean 'buy at any price'.

If you find stocks of companies with mega brands and strong financials without any major disruption happening around them, then it's in the Buy and Hold Forever category kind of stocks.

Warm regards,


Aditya Vora
Research Analyst, Hidden Treasure