This candy company has grown at an annual rate of nearly 20% in the last five years. The shares have held up very well during COVID-19, and look attractive at this level.
Tootsie Roll Industries, Inc. (TR)
From Weiss Ultimate Portfolio
Everybody knows Tootsie Roll. But you may not know just how long and storied this company’s history is. Leo Hirschfield founded Tootsie Roll in 1896, naming it after his five-year-old daughter, who went by the nickname “Tootsie.”
Tootsie Roll Industries (TR) has grown over the years, expanding its lineup of products to include Charms Blow Pops, Andes Mints, DOTS, Junior Mints, Charleston Chew, Dubble Bubble, and many more names recognizable to the forever young. Those products are sold to roughly 3,100 customers, including supermarkets, dollar stores, drugstore chains, vending machine operators and warehouse clubs.
Unlike other larger food and beverage companies, Tootsie Roll is essentially controlled by the Gordon family. Ellen Gordon became CEO after her then-95-year-old husband passed away in 2015. She now controls more than 53% of the outstanding common stock. I love it when insiders have a lot of their own “skin” in the game, and there are very few stocks with that degree of insider ownership.
Another thing I like about Tootsie Roll is that management doesn’t kiss Wall Street’s feet. They don’t hold quarterly conference calls; they don’t interact much with the media and they’re largely ignored by analysts.
Management has also been adamant that Tootsie Roll isn’t for sale. But a steady stream of candy acquisitions over the past few years keeps the question alive:
Mars Inc. bought Wrigley in 2016; The Hershey Company (HSY) bought Amplify Snack Brands for $1.6 billion in 2018; and Italian candy giant Ferrero bought Nestle’s (NSRGY) U.S. candy operations (including the Baby Ruth and Butterfinger candy bars) for $2.9 billion in 2019.
I don’t know when or if controlling family members would ever sell. But IF they were to do so, it would likely be at a nice premium to where the shares are trading today.
If you’re worried that COVID-19 will drag Tootsie Roll down ... don’t. Tootsie Roll has been almost immune to the stock market selloff. TR traded as high as $37.64 and hasn’t fallen below $32 this year. That’s resilient!
Recommendation: Using 5% of the funds allocated to this service, buy Tootsie Roll Industries (TR) at the market. Then place a protective stop to sell all shares at $30.70. This order is good-till-canceled.
Tony Sagami, Weiss Ultimate Portfolio, 1-877-934-7778, www.weissratings.com, May 1, 2020