By Timothy Lutts, Chief Analyst, Cabot Stock of the Month
From Cabot Wealth Advisory 8/4/14 Sign up here for Cabot Wealth Advisory—it's free!
Back on July 23, Roy sent this update to his readers about Gildan Activewear (GIL), a Canadian clothing company whose leading revenue stream is the very unexciting business of making blank t-shirts. Gildan sells this "printwear" in bulk to companies that print logos and other promotional content on them.
"Gildan Activewear (GIL 60.58) reached its Minimum Sell Price of 60.40 yesterday, July 22. GIL was first recommended in the Special Features Model using the Undervalued Canadian Stocks analysis in the October 2012 Special Feature Edition at 32.17. GIL has gained 87.8% during the past 21 months compared to a much smaller gain of 38.8% for the Standard & Poor's 500 Index during the same time period. GIL's current P/E is 21.3 compared to its 10-year average P/E of 15.3. GIL is overvalued and should be sold."
That's it. Not very exciting, but devastatingly effective.
If that sounds like the kind of system that would work for you, Roy would be happy to take you under his wing. You can learn more here.
By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 2/28/13 Sign up for free Cabot Wealth Advisory e-newsletter
In my opinion, many exceptional buying opportunities now exist and investors should buy undervalued Canadian stocks. I screened my Benjamin Graham Database to find Canadian companies with rapidly growing earnings and strong balance sheets.
In my opinion, this company offers outstanding appreciation potential during the next one to two years.
Gildan Activewear (GIL) manufactures basic apparel including T-shirts, sport shirts, socks and sweat clothes. The company sells plain garments, known as blanks, to screenprinters and decorators who add designs and logos. Gildan, based in Montreal, is the leading supplier of blank garments in the U.S., Canada and Europe.
The company is adding new products including underwear for men and boys, and expanding geographically into Mexico and Asia. The company has steadily boosted its U.S. market share for major items, partly because of the low price of its products. In addition, Gildan is enlarging existing facilities and constructing new plants in Honduras and Asia to increase manufacturing efficiency and boost production capabilities.
Gildan, which depends on cotton to make its garments, suffered through a year of very high cotton prices, which caused expenses to soar and profits to drop. Cotton prices have retreated to previous levels during the past six months.
In May 2012, GIL acquired Anvil Holdings, a maker of high-quality T-shirts and sport shirts. The purchase is already adding to profits. In addition, Hanesbrands, a Gildan competitor, announced it will no longer sell apparel to wholesale screen-printers. Gildan already commands 65% of the market and is well-positioned to grab Hanesbrands’ share.
Sales soared 39% during the quarter ended 12/31/12, easily beating my estimate. EPS advanced from a deficit of 0.38 a year ago to a profit of 0.32. The quarterly dividend was recently increased by 20% and now provides a yield of 1.0%. GIL shares remain undervalued at 12.8 times my 12-month forward EPS estimate of 2.77 despite the probable surge in sales and earnings during the next several quarters.
I will continue to follow Gildan and other Canadian companies in my Cabot Benjamin Graham Value Letter. My April issue will focus on six new undervalued Canadian stocks.
Editor's Note: You can find additional stocks selling at bargain prices in the Cabot Benjamin Graham Value Letter. In every issue, you’ll find my legendary Maximum Buy and Minimum Sell Prices for over 250 stocks. Click here to get started today!
By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 9/20/10 Sign up for free Cabot Wealth Advisory e-newsletter
Gildan Activewear (GIL) is headquartered in Canada, but conducts its business worldwide and is traded on U.S. exchanges. The company’ sales and earnings have grown very rapidly in the past and will very likely continue to grow at a rapid pace well into the future. The company has geared up by adding substantial capacity, cutting costs and streamlining operations to become more efficient.
Gildan Activewear manufactures basic apparel including T-shirts, sport shirts, socks and sweat clothes. The company sells plain garments, known as blanks, to screenprinters and decorators who add designs and logos. Gildan, based in Montreal, is the leading supplier of blank garments in the U.S., Canada and Europe. The company is adding new products including men’s and boy’s underwear, and expanding geographically into Mexico and Asia. The company has steadily boosted its U.S. market share for major items to 63%, partly because of the low price of its products.
Gildan is experiencing stronger demand from wholesalers and from mass-market retailers, such as Walmart. Higher demand has enabled the company to boost prices recently to offset rising cotton costs. The company is building two new textile and sock manufacturing facilities in Honduras to meet growing demand.
Gildan is also building a modern distribution center in North Carolina and has begun using its biomass steam generation system designed to save energy in the company’s manufacturing facilities in the Dominican Republic. The enlarged capacity and increased efficiency will help boost sales by 17% and EPS by 24% during the next 12 months. The company has a strong balance sheet with minimal debt and lots of cash. Gildan pays no dividend. At 14.2 times our 12-month forward EPS estimate of 2.04, GIL shares are undervalued.
J. Royden Ward
Editor of Cabot Benjamin Graham Value Letter
A lifelong investment professional, J. Royden Ward applies his 40 years of investment research, portfolio management, writing and publishing experience to his role as analyst and editor of Cabot Benjamin Graham Value Letter
, which is directed to long-term investors seeking a guide to profitable value investing based on the time-tested systems originally developed by Benjamin Graham, the Father of Value Investing. A second-generation disciple of Benjamin Graham, Roy in 1969 pioneered the development of a computerized model that applied the formulas developed by Graham using a unique ranking system. Today, Roy applies his system to two models in the Value Letter