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Gildan Activewear Inc.'s largest shareholder has substantially increased its stake in the T-shirt and sock company since its stock cratered two months ago on the heels of an earnings warning.

Fidelity Management & Research Co. said in a regulatory filing Friday that it had purchased 3.6 million Gildan shares in the past month to hold 21.6 million shares, or 17.8 per cent of the stock. Another recent Gildan regulatory filing showed Fidelity held just 12.5 million shares, or 10.3 per cent of the stock, on Dec. 12. Fidelity didn't give a reason in its filings for its recent purchases, except to say they were "for investment purposes only."

However, Gildan chief financial officer Laurence Sellyn said in an interview last week that, after Gildan warned the market in early December that it would lose money in its first quarter ended Jan. 1, "long-term value investors who know the story" were among those who bought back into the stock.

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Fidelity has been the top institutional holder of Gildan stock since 2002, and appears to have been active in Gildan stock last year, selling down its stake as a dramatic spike in cotton prices last year began to wreak havoc on clothing manufacturers.

Gildan shares lost one-third of their value on Dec. 1 after the company warned that high cotton prices and weak demand would result in its first quarterly loss in 10 years. After the price of cotton spiked to more than $2 (U.S.) a pound in early 2011 – up from traditional levels of around 65 cents – Gildan responded by increasing its prices.

When the price of cotton plummeted with equal velocity to close to $1 in late summer, wholesalers – which account for the majority of Gildan's demand – held off on buying new higher-priced new product, choosing to run down their inventories and wait for Gildan to drop its prices.

Gildan eventually offered customers a rebate in December, taking a hit to earnings and sales but also putting much of what Mr. Sellyn called "a misalignment" in costs and prices behind it.

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About the Author

Sean Silcoff joined The Globe and Mail in January, 2012, following an 18-year-career in journalism and communications. He previously worked as a columnist and Montreal correspondent for the National Post and as a staff writer at Canadian Business Magazine, where he was project co-ordinator of the magazine's inaugural Rich 100 list. More

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