History May Not Repeat Itself, But If It Just Rhymes, Tecumseh's Share Price Should Shine
- Tecumseh is a global manufacturer of hermetically sealed compressors used mainly in refrigeration and air conditioning applications.
- Though perennially loss making, it has a modest net debt level due in part to cash generated from asset sales and tax refunds. It now trades below 0.4x book value.
- Its share price has returned to levels that attracted activist interest in the past that, coupled with management changes and a turnaround plan, saw its share price triple.
- Though that speculative bubble has burst, the underlying assets and upside potential remains intact. Tecumseh retains valuable non-core assets, USD293 million in NOLs and an attractive commercial refrigeration business.
- Downside is limited by Tecumseh’s significant discount. Re-emergence of past catalysts over a one year investment horizon could see 100% plus upside.