The Gildan Story: small, medium and large

The story starts out routinely enough.  In June, 1998 a new initial public offering memorandum came across an analyst’s desk at Bissett and Associates. Founded by Dave Bissett in the 1970s the firm was fast emerging as one of Canada’s premium independent investment counselors. This particular financing was Textiles Gildan, a small Quebec based casual clothing manufacturer. The intention was to raise 50 million dollars (U S) with the sale of 3 .85 million shares at 13 dollars. Alas the plans of mice and men oft go aria and Texties Gildan eventually sold 3 million shares at 7 dollars totaling 21 million dollars for the firm’s coffers.

The company controller said that the results of the actual IPO were due to a “crappy market week”  In support of this view the Dow Jones Industrial Average did experience a turbulent week from June 15 to 19, 1998 hitting a high of 8,890 before closing at 8680. Such are the vagaries of equity markets.

Reflecting on the deal, Fred Pynn was very skeptical. Currently he discusses the opportunity, saying “a T Shirt manufacturer”?  Fred is one of Canada’s premium equity analysts. Good fortune was on the investor’s side because Bissett soon founded a micro fund designed to pool small capitalization companies such as Textiles Gildan.  This allows for participation by all types of investors. Bissett’s entry price is not known but the shares of Textiles Gildan traded initially at $ 1.70 adjusted for splits and so on.

Time passed and the company, now called Gildan Activewear, prospered, as did the shareholders. The market capitalization increased many times and eventually the stock was incorporated into Bissett’s Mid Cap fund as a second home for the Gildan shares. Once too large to occupy a place in this investment vehicle, the Bissett Canadian Equity Fund was available to facilitate ownership. To be sure the ride has always been exciting as the share price has fluctuated, and at one time dropped to beloe ten dollars.

So what is the lesson here?  A quote by Jack Bogle, an investment veteran is a good reminder “Investors spend so much time chasing hot asset classes and hot fund managers that they end up buying high and selling low, all the while incurring transaction costs. Investors need to understand not only the magic of compound long-term returns but the tyranny of compound costs.”

Give it up for an investment counselor that accommodated company size and stayed the course to everyone’s benefit.