Canada markets closed
  • S&P/TSX

    20,200.65
    +44.29 (+0.22%)
     
  • S&P 500

    4,246.44
    +21.65 (+0.51%)
     
  • DOW

    33,945.58
    +68.61 (+0.20%)
     
  • CAD/USD

    0.8126
    -0.0001 (-0.01%)
     
  • CRUDE OIL

    73.08
    +0.02 (+0.03%)
     
  • BTC-CAD

    39,795.93
    +373.03 (+0.95%)
     
  • CMC Crypto 200

    767.68
    -26.65 (-3.36%)
     
  • GOLD FUTURES

    1,779.20
    +1.80 (+0.10%)
     
  • RUSSELL 2000

    2,295.95
    +9.85 (+0.43%)
     
  • 10-Yr Bond

    1.4720
    -0.0120 (-0.81%)
     
  • NASDAQ futures

    14,273.50
    +15.25 (+0.11%)
     
  • VOLATILITY

    16.66
    -1.23 (-6.88%)
     
  • FTSE

    7,090.01
    +27.72 (+0.39%)
     
  • NIKKEI 225

    28,884.13
    +873.20 (+3.12%)
     
  • CAD/EUR

    0.6803
    -0.0001 (-0.01%)
     

Get Defensive With This “Essentials” Stock

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
Stand out from the crowd
  • Oops!
    Something went wrong.
    Please try again later.

Apparel businesses were significantly impacted due to the pandemic. However, companies like Gildan Activewear (TSX:GIL)(NYSE:GIL) continue to be excellent defensive options for investors today.

Indeed, this company appears to be well positioned to make a strong recovery following a decline in sales in 2020. Here’s why I think this essentials stock should be on investors’ radar today.

Strategic moves have positioned this company well

Gildan is in a relatively simple business. The maker of essentials such as t-shirts and undergarments has continued to be a sector most investors have ignored of late.

I think some of this sentiment makes sense. After all, this sector isn’t one that growth investors would remotely be interested in.

Gildan’s business model is both simplistic and defensive. However, the company’s management team has made some impressive moves to retain profitability over time. Investments in a top-notch manufacturing process and an inexpensive vertically integrated supply chain are indicative of some of these moves. Indeed, Gildan has built a name for itself by building powerful brands and well-established relationships with customers.

A couple of years back, this company made changes to its organizational structure and consolidated some of its business segments. Such measures were taken to simplify its business operations. Years of acquisitions made the company’s business model rather complex. Simplification sounds easy to accomplish, but for investors in Gildan, simplicity is everything.

Gildan’s balance sheet looks attractive today following these moves. The company’s debt-to-equity ratio of 0.64 suggests the company’s moved to limit its overall debt burden. Positive margins and a highly defensive business model make this company an intriguing choice for defensive investors today.

The company’s low-cost operations are undoubtedly attractive for investors. It has become much more efficient in designing, developing, and operating its manufacturing facilities over the years.

Most of these facilities are owned by this company itself, which enables it to have much more control over the costs, efficiency of the production process, quality of products, etc. Indeed, this company generates more than 90% of its revenue today by selling only products manufactured internally.

Bottom line

Expectations are that Gildan will continue to be a great long-term defensive holding for investors.

However, I’m not the only one who thinks this.

Sabahat Khan, an analyst at RBC Dominion Securities, believes that further improvements are on the horizon. He believes Gildan’s capital-allocation plans and a surge in orders due to inventory restocking through the remainder of the year should be bullish for Gildan in the quarters to come.

Growth in the U.S. market and a continued retail reopening position Gildan as a sneaky pandemic reopening play. With a growth-to-value rotation underway, I wouldn’t be surprised to see Gildan catch a bid from here.

The post Get Defensive With This “Essentials” Stock appeared first on The Motley Fool Canada.

Like this top defensive pick? Here are a few other high-growth picks worth considering today:

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

More reading

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends GILDAN ACTIVEWEAR INC.

5 Years From Now, You’ll Probably Wish You’d Grabbed These Stocks…Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. You aren’t on the list to receive our newest stock picks — but it’s not too late. 2021

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting