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Two Senior CEOs Show No Signs of Slowing Down

Stocks in this article: DOLE TR HSY

I've followed Tootsie Roll Industries for years, and previously held a position in the name. It is a who's who of brands, which besides the obvious (Tootsie Rolls, and Tootsie Pops) also includes Charleston Chews, Charms Blow Pops, Dubble Bubble, Junior Mints, Andes Mints, Razzles, and Sugar Daddy to name a handful. This is a solid and potentially valuable portfolio of well-known products, and one that has been profitable for Tootsie Roll for decades.

Unfortunately over the years the company's operating performance has been sliding. In 2004 and 2005, the company's net margins were above 15%. But since then, revenue has stagnated, and net margins have been cut dramatically. Last year, the company bottom-lined 9.5% of revenue, which is nothing to sneeze at, but a far cry from where it was. Revenue has also been flat, increasing less than 10% since 2006. DOLE Chart DOLE data by YCharts

When I owned Tootsie Roll shares, it was in part due to the presumption that aging owners would be selling the business, and that that it would command a nice premium to a company such as Hershey (HSY). I finally gave up on that notion as revenue stagnated, margins declined, and the Gordons showed no interest in selling.


Several years later, the Gordons are still going strong, the stock is doing fairly well, and commanding a rather high 37 price-to-earnaing ratio. Given David Murdock's offer for the rest of Dole, perhaps I had it all wrong. Perhaps the Gordons will be buyers, and not sellers.

Let's hear it for the old guys (and gals)!

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.

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