New: The 5 Best Stocks to Buy in April 2023 [PREMIUM PICKS]

Inventory management is still dogging some companies — and investors could profit as everything sorts out.

| More on:
man touches brain to show a good idea

Source: Getty Images

Premium content from Motley Fool Stock Advisor Canada

“Best Buys Now” Pick #1:

Gildan Activewear (TSX:GIL)

One lesson we all learned as consumers during the pandemic is that inventory management can be quite tricky.

Now, as investors, we’re still learning how to deal with that challenge. Supply chains remain in a state of disarray, and many companies continue to report bloated inventory levels on their balance sheets.

Wholesale apparel manufacturer Gildan Activewear (TSX:GIL) is a prime example, finishing its most recent fiscal year with inventory of US$1.2 billion, up considerably from the US$774 million that it began the year with.

Not only does an elevated inventory level tie up a company’s cash, but it also introduces the risk that the business won’t be able to normalize its inventory through traditional sales. Significant discounting, which eats into margins (or worse, writing off the inventory entirely) could enter the fray.

The flip side of this is that if the company is able to work that inventory down in an orderly fashion, cash flow benefits rather nicely.

To be clear, we don’t know how this will play out at Gildan. (The company is set to report Q1 results on May 3.) In our opinion, though, investing in Gildan today looks like an opportunity to own a high-quality company at a multiple that’s very attractive.

The market foresees a rocky road ahead for Gildan. In the short term, that may indeed play out as the company wrestles with its inventory and the challenging market dynamics. However, in the long term, we’re very much of the mind that the risk/reward balance tilts heavily towards reward here.

“Best Buys Now” Pick #2


Want All 5 “Best Buy Now” Stocks? Enter your email address!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Iain Butler has positions in Gildan Activewear. The Motley Fool recommends Gildan Activewear. The Motley Fool has a disclosure policy.

More on Top TSX Stocks

analyze data
Dividend Stocks

How to Build a Diversified Portfolio With These Top TSX Stocks

Looking to diversify your portfolio? The market is full of stellar options to consider, including these top TSX stocks to…

Read more »

butterfly emerges from chrysalis
Top TSX Stocks

Just Released: The 5 Top Stocks to Buy in May 2023 [PREMIUM PICKS]

Our favourite ideas this month, including the single best way to invest in bank stocks.

Read more »

Dividend Stocks

Get More Out of Your TFSA: Invest in These Popular Canadian Companies

High-yield stocks like Enbridge and high-growth potential stocks like Blackberry are ideal candidates for your TFSA.

Read more »

Big Bitcoin logo.
Metals and Mining Stocks

2 Canadian Stocks I’ll Be Buying Hand Over Fist in April

Buying in the early days of recovery may help you ride the bulk of positive momentum and accumulate decent returns.

Read more »

Two hands holding champagne glasses toasting each other with Paris in the background
Dividend Stocks

2 Top TSX Stocks Under $15 Per Share

Two outperforming TSX stocks trading for less than a cheap bottle of wine are excellent buying opportunities right now.

Read more »

dividends grow over time
Top TSX Stocks

Just Released: The 5 Best Stocks to Buy in March 2023 [PREMIUM PICKS]

When we look back five years from now, our bet is that this current $4 annual dividend payout will be…

Read more »

A sapling regrows in a forest that has been logged.
Top TSX Stocks

Small-Cap Investors: Our Favourite 12 Stocks for 2023 [PREMIUM PICKS]

Motley Fool Hidden Gems' yearly list of "Starter Stocks" is our attempt to answer a simple question: “Where do I…

Read more »

top TSX stocks to buy
Stocks for Beginners

Just Released: The 5 Best Stocks to Buy in February 2023 [PREMIUM PICKS]

Making money investing in stocks is not hard -- often, all you need is patience.

Read more »