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Drew Handy

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  • Tootsie Roll Industries: Will Patient Investors Eventually Be Living The Sweet Life? [View article]
    Hello Sugar Charlie (apt screen name for discussion on this stock),

    Thank you for your comment and adding insight to the discussion. Indeed, I agree that purchasing with expectation of acquisition carries some risk. The appealing aspect of TR is that few iconic brands in American consumer culture are available at or below a $2 billion market cap. The unappealing aspect is that there is no way to know when more effective management will take over.

    I agree there are many better investments in terms of long term fundamentals. Those you've mentioned in the consumer staples space would fit the bill and many have attractive valuation metrics. None, however are likely takeover candidates due to their size.
    Jun 14 01:20 PM | Likes Like |Link to Comment
  • Tootsie Roll Industries: Will Patient Investors Eventually Be Living The Sweet Life? [View article]
    Thank you for the comment and insight. The existence and potential magnitude of a premium for an acquisition of TR is certainly an open question worthy of dialog. I would counter that although some of the anticipated premium may be priced in as you describe, I would expect an acquisition to be at a premium due to the four factors I've described in the article.

    Describing one of the factors in a more detailed manner than in the article, the top 5 executives at TR are paid (inclusive) over $15 million annually, when net income is only $45 million. Investors and future acquirers may view the denominator in the P/E as artificially depressed due to the lack of performance and excessive compensation of present management. Another difference is a lack of debt, which was present in Cadbury when acquired by Kraft. TR would bring net assets to an acquirer in a transaction.

    Thanks for adding to the discussion.
    Jun 14 12:00 AM | Likes Like |Link to Comment
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