(FORTUNE Magazine) – TOOTSIE ROLL INDUSTRIES This 97-year-old Chicago company has found that, in the candy business at least, oldies-but-goodies are reliable sources of growth. Much of Tootsie Roll Industries' considerable success comes from its ability to stick to, and occasionally buy, proven brands like Tootsie Pops, Sugar Daddy, and Charms Pops. Says President Ellen Gordon: ''There are novelty candy companies, but we are not one.'' Tootsie Roll started out making candy nearly a century ago, and that's all it does today at its four factories in the U.S. and one in Mexico City. They produce 37 million Tootsie Rolls a day, as well as 16 million lollipops. The company has collected 17 candy brands through the years but remains a slow and selective buyer. Its purchase in October of five chocolate and caramel brands from Warner-Lambert was Tootsie Roll's first acquisition since buying Charms five years ago. The new brands, which include Charleston Chew and Sugar Babies, add $60 million a year in sales. Elliott Schlang, an analyst at Kidder Peabody in Cleveland, expects 1994 net income to rise 16%, to $41.6 million, on a 24% increase in revenues, to $344 million. The stock traded recently on the New York Stock Exchange at $73.50, or 19 times Schlang's estimate of 1994 earnings per share. Tootsie Roll is run by Ellen Gordon, 62, and her husband, Melvin, 74, who has been CEO since 1962. Together with five other executives, they plan all marketing, manufacturing, and distribution strategies. The Gordons hold 47% of the stock, much of which was inherited by Ellen Gordon, whose family has been Tootsie Roll's largest shareholder since the early 1930s. Although the Gordons have a succession plan in mind, they won't give any details, nor have they announced any retirement plans. More than 90% of Tootsie Roll sales are in the U.S., with most of the rest in Mexico, its second-largest market, and Canada. The company has a new sales office in Hong Kong and has recently expanded exports to Eastern Europe and the Middle East. Tootsie Roll has paid a cash dividend for the past 50 years, and has increased it every year since 1963.

TREADCO Retreads are only a small part of the tire market for cars, but they make up more than 60% of all sales of replacement tires for trucks. Treadco, in Fort Smith, Arkansas, is the U.S.'s second-largest retreader (behind Goodyear). It has 45 sales warehouses throughout the South, but it sells mostly through a ; team of 130 salesmen. They travel with truckloads of tires, making regular visits to customers to help check and consult about old tires and to sell new ones. That one-on-one service has helped the company grow strongly despite a sluggish tire market. Treadco began retreading in 1958 as a subsidiary of Arkansas Best Corp., a trucking company. It was spun off in 1991, and Arkansas Best still holds 46% of the shares. Treadco uses a ''cold bonding'' process of retreading, which it franchises from Bandag Inc. of Iowa. Cold bonding requires much lower temperatures than traditional methods to attach new tread to a worn tire, resulting in less damage to the core tire. Scott Merlis, an analyst at Morgan Stanley, expects 1994 net income to rise 16%, to $6.4 million, on an 11% increase in revenues, to $119 million. The stock traded recently on Nasdaq at $15, or 12 times Merlis's estimate of 1994 earnings per share. Retreads sell for about one-third the price of new truck tires.

APPLIED INNOVATION AI in Columbus, Ohio, designs and produces computerized switches for the telecommunications industry. Its main customers are four of the Baby Bells, notably US West and BellSouth, which use switches to link their telephone equipment to computers that monitor and control the operation of the equipment. ''For a single telephone call, more than 100 computers can be involved,'' says AI CEO and founder Gerry Moersdorf Jr. The company's switches not only connect those computers to a central control area but also help locate failures along the line. Mark Koprucki, an analyst at Ohio Co., expects net income in 1994 to surge 67%, to $6 million, on a 66% increase in revenues, to $25 million. The stock traded recently on Nasdaq at $44.50, or 29 times Koprucki's estimate of 1994 earnings per share. Although the Bells provide 90% of its revenues, AI also sells to other companies involved with transmitting telephone calls and data, including MCI and ADC, an equipment supplier. AI has made switches and other communications equipment since it was founded in 1983.