Welcome back to Monday Delights!

This is your Monday morning dose of inspiration. Each week, I’ll share five intriguing investment ideas that recently caught my attention. These ideas are meant to spark your research and help you kickstart the week ahead with fresh insights.

Because these ideas are the result of my first-level idea generation process, they require more in depth research. Therefore, the ideas will often be concise, with occasional references to valuable work from other practitioners that I encourage you to explore.

If you have something fascinating to share that could benefit me and the wider community, don’t hesitate to send it my way—I’d love to hear from you!

Nareru Group

• Market Cap: JPY 19.5B
• EV: JPY 21.0B
• ROE: 17.2%
• EV/EBIT: 6.5

Nareru Group operates primarily as an engineer-dispatch company that supplies trained and developing engineers to construction and IT clients, recruiting inexperienced workers and training them to address chronic skilled-labour shortages in those industries; its revenue comes from placement and dispatch fees charged to client firms and from workforce development services.

Although the stock screens as cheap, much like many Japanese equities, the IT-services recruitment segment raises some concerns. While the construction-focused activity is chiefly cyclical, recruitment for IT engineers may face more persistent structural headwinds.

Ramsdens Holdings

• Market Cap: GBP 110.0M
• EV: GBP 111.9M
• ROIC: 21.9%
• EV/EBIT: 7.6

Ramsdens is a diversified high-street financial-services retailer whose business model combines pawnbroking and short-term lending with retail sales of new and second-hand jewellery and watches, purchases and resale of precious metals, and foreign-currency exchange services delivered through a network of branches and online channels.

Pawnbroking tends to be economically counter-cyclical, as demand rises when consumers face financial stress. For investors with a bearish view on the UK economy, Ramsdens may therefore represent a cheap secular compounder. One caveat, however, is that a meaningful share of earnings comes from precious-metals trading—particularly gold—so profitability is partly tied to gold prices.

At current gold prices, Ramsdens has a NAV of over GBP 50M, consisting mainly of cash, gold, and jewellery. On this basis, the stock trades at roughly 6× adjusted EV/FCF.

Butler National Corp

• Market Cap: $ 157.0M
• EV: $161.4M
• ROIC: 17.4%
• EV/EBIT: 9.0

Butler National operates in aerospace products and professional services, designing, manufacturing and integrating aircraft structural modifications and avionics systems, providing maintenance and FAA repair-station services, and selling related defense and surveillance products.

By combining an aerospace business with a casino, Butler National is a strong contender for this year’s award for “most weird business combination”—and that is after reviewing many oddball candidates this year.

Jokes aside, the company appears to offer a low-risk, moderate-return opportunity. The stock trades at around 10× EV/FCF with relatively steady free-cash-flow generation. Activist pressure has also pushed management toward share repurchases, which the company has committed to executing.

Alcoa Corp

• Market Cap: $ 10.0B
• EV: $ 9.7B
• ROE: 19.2%
• P/B: 1.6

Alcoa is a vertically integrated aluminium company that controls stages from bauxite mining through alumina refining to aluminium smelting and downstream value-added cast and rolled products, and it monetizes this integration through commodity and specialty aluminium sales while periodically reshaping its portfolio (for example via joint-venture stakes and acquisitions) to improve balance-sheet flexibility and focus on higher-margin or strategic assets.

Alcoa positions itself as the largest aluminium producer outside China. Given the extreme energy intensity of aluminium production, the divergence in energy economics between China—now increasingly reliant on costly energy imports—and the United States—with its abundant low-cost natural gas—could strengthen Alcoa’s pathway to becoming a low-cost producer of a material critical to the secular electrification trend.

Additionally, Alcoa owns two of the only four aluminium smelters in the United States, which should be regarded as highly valuable and difficult-to-replace assets.

Azkoyen S.A.

• Market Cap: € 204.8M
• EV: € 219.8M
• ROE: 16.1%
• EV/EBIT: 8.3

Azkoyen designs, manufactures and sells technological products and services for vending and hospitality (HORECA), payment systems, and security/time solutions; its business model combines industrial manufacturing of vending and payment hardware with software and service offerings, distribution across many countries, and recent corporate restructuring to concentrate its coffee & vending and payment activities into a dedicated subsidiary to sharpen operational focus.

Azkoyen has been a steadily and profitably growing business that has recently emerged from a multi-year deleveraging cycle. The company is now committed to distributing 50% of earnings as dividends, implying a forward yield of 4–5% alongside high-single-digit earnings growth.

That’s all for this week. I hope some of these ideas sparked your interest and inspired your research for the days ahead. If you’re looking for more inspiration for companies to explore, I recommend checking out last week’s article.

Have a great week!