TR short pitch:
– Gordon family controlled producer/seller of Tootsie Rolls at 41x earnings.
– No growth business and over time unit volumes will decline.
– It’s not a product that fits with health trends.
– Stock is up 30%+ since Oct’22 and trades at all-time highs.
– Owning TR made some sense in a zero interest rate environment.
– A 3.5% yield with some inflation protection was arguably better for investors than a 2% treasury yield.
– Math is now reversed (2.4% earnings yield vs 4.8% T-bills) and no longer makes sense.
TR valuation:
– At 41x EV/NOPAT $TR is dead money at best as the world isn’t going to suddenly start eating Tootsie Rolls in greater quantities.
– The risk/reward is skewed to the short side.
Exp. gain: Not specified.
Full write-up (free guest account required):
https://www.valueinvestorsclub.com/idea/TOOTSIE_ROLL_INDUSTRIES_INC/5205622333