Saturday, 9 April 2005

Company Update
Tootsie Roll Industries
Ticker: TR (A shares), TROLB (B shares)
Price: $32.27(A shares)

Shares of Tootsie Roll were up more than 8 percent yesterday ($2.47) based on a Business Week article that echoed sentiment we featured in our January 28th column Rolling Towards a Takeover that presumed that due to aging owners, and a very strong brand name, Tootsie Roll may be an attractive takeover target.

The Business Week article quotes Elliot Schlang, an analyst with LJR Great Lakes Review who follows the company, projecting a takeout price of between $35 and $37 per share. Your editor has taken a position in Tootsie Roll within the past two months, but is not satisfied with the takeout range Schlang suggests.

A caution here for readers who are interested in this company. While Tootsie Roll had a nice gain yesterday, this was due to the Business Week article, obviously. There is no new information to suggest that a takeover is imminent. While we at Cheap Stocks expect it in the future, no one knows when (or if, for that matter).

While we are happy to be up 12 percent since purchasing the shares in the $29.50 range (return includes the recent 3% stock dividend, and $.07 cash dividend), we would not be surprised to see shares pull back once again, when the markets realize that while the Business Week article has merit in principle, the timing is uncertain.

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