There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

August 4, 2009 - Tootsie Roll Industries, Inc. (TR-NYSE) together with its subsidiaries, engages in the manufacture and sale of confectionery products in the United States, Canada, and Mexico. The company sells its products under the trademarks of TOOTSIE ROLL, TOOTSIE ROLL POPS, CHILD'S PLAY, CARAMEL APPLE POPS, CHARMS, BLOW-POP, BLUE RAZZ, ZIP-A-DEE POPS, CELLA'S, MASON DOTS, MASON CROWS, JUNIOR MINTS, CHARLESTON CHEW, SUGAR DADDY, SUGAR BABIES, ANDES, FLUFFY STUFF, DUBBLE BUBBLE, RAZZLES, CRY BABY, and NIK-L-NIP.

We're talking candy here, lots of candy. But not as much as in past years. Sales slowed in 2007, showing a top line that went from $496 million to $492.7 million. For 2008, revenues dipped a little more, to $492.1 million. But this year, there may be a turnaround. While there is only 1 analyst following the stock, the estimate is for $504.8 million this year and for 2010, $515 million.

Profits followed the same pattern from 2006 to 2008, going from $1.12 to $.89 to .68. They'll be joining the upward trend in sales this year as well, with expectations of 83 cents a share, then for 2010, 90 cents. Estimates for the third quarter are for 39 cents a share, up from 35 cents in the same period last year. Look fo 14 cents in the fourth quarter, up from 10 cents last year in the fourth.

The real story here is management. The Gordons (Melvin, 89, and Ellen, 77) own 60% of the voting power through high ownership of the common (43.7%) and the Class B shares (81.6%) which have the superior voting rights. They have owned the company for years, pay themselves very handsomely and are averse to selling the candy maker. One example of their perks: he was paid $3.3 million in 2008, she made $3.2 million. They also used the company aircraft for a value of $596,886. There's also a company apartment they both shared. Things are sweet at the top.

The net profit margin has been compressing over the last few years, having gone from 13.3% in 2006, to 10.5% to 7.9%. That's supposed to change this year with a projected rate of 9.3% in 2009 and 10.1% in 2010. Return on Equity also followed the same pattern, starting at 10.5% in 2006, then 8.1%, to 6.1%. This year, estimate is for 7%, then 7.5% next year. So things look to be turning around, if these projections hold up.

There's a good chance they will. In the first half of this year, sales were up 4%, even with the general economic meltdown. The company was aggressive in its marketing early in the year, and some price hikes held. Even with higher prices, the company offers sweet teeth a good value, something that should keep sales humming even in these bad times. And don't forget Halloween is only 3 months away, a traditionally great season for Tootsie and its well-priced offerings.

On the commodity side, cocoa prices have stabilized even with some weather disruptions and continued high worldwide demand. Watch out for a change in cocoa's prices as well as sugar. If they rise too quickly, margins will again be hurt.

Over the last decade the stock has held in a rather narrow range which should appeal to some conservative investors, going from a low of $19 earlier this year, to a high of $34, reached last year. The stock has always carried a rather high P/E ratio as investors like the steady, somewhat predictable increases in sales and profits, up until 2007. Now it seems the company is back on track to deliver 8% to 10% growth in earnings.

More numbers: Trailing P/E is 33.4 while the Forward P/E is 26.6. Price to Sales is 2.73. Price to Book is 2.15. The Operating margin for the last 12 months was 13.61% while the Profit margin was 8.14%. Return on equity was 6.5%. Total cash is $70.03 million for cash per share of $1.24. Total debt is $7.5 million. Current ratio is 3.37. Book Value per share is $11.25. The dividend will be 32 cents a share this year, up from 31 cents last year. It takes 33% of earnings for the dividend payment. Value Line gives the company a Financial Strength of A+.

Take a closer look at Tootsie Roll if you want to add a solid, steady performer. While the last 2 years interrupted many years of slow but continuous growth, it appears the company is back on track to deliver better sales and earnings. If the better numbers put the company in the acquisition spotlight, so much the better. But don't count on the owners to sell. They've got it pretty good just the way things are.

 Company Web site: www.tootsie.com

- Ted Allrich