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Profiting from Patience

NEW YORK ( TheStreet) -- Deep-value situations sometimes take a great deal of time and patience to play out. In this fast-paced, up-to-the-minute information-driven market, many investors don't have that level of patience, especially when it comes to companies with little or no analyst or financial media coverage. That's often where there are great opportunities, but it is difficult to get relevant information.

Tecumseh (TECUA, TECUB), a poster child for patience, is a company you've probably never heard of. If you have, it's probably due to the company's small engine business, which it sold back in 2007.

Today, the company is primarily a manufacturer of hermetically sealed compressors used in air conditioners and freezers for both residential and commercial applications. This is a business that suffered during the last recession as demand fell. Revenue has been on a downward path for several years, in part due to the sale of businesses, but also due to poor economic conditions.

Shares fell to about $3 in May 2012, following yet another quarterly loss, but have been on a tear ever since; they are trading at a two year-plus high of $10.55. Last month, the company, which generally been tight-lipped at least as long as I've been a shareholder, held an investor update call, which was a long time coming. TECUA Chart TECUA data by YCharts

The call outlined cost-cutting initiatives and other potential improvements, including monetizing some of the company's assets. It was a brilliant move by a company that has had its share of internal struggles over the years. It allowed investors, for once, to get a glimpse into how the company plans to return to profitability.

The company's balance sheet and supporting asset base attracted me to it in the first place. At the end of 2012, Tecumseh owned 12 properties around the world, for a total of 3.6 million square feet of manufacturing and other building space.

Tecumseh's tangible book value is $13.49, and so the shares are trading at just 0.78 times tangible book. The company ended the first quarter with debt of $60 million, and $42 million, or $2.27 per share, in cash.
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