Nobody knows what will happen in future. But in the case of this particular growth stock, I do see continued grounds for optimism about its business prospects. I would consider buying it for my portfolio to hold for the next five years — or even longer.

Warren Buffett-style moat

The company in question is Judges Scientific (LSE: JDG).

Many may not even have heard of it, as it is a niche business-to-business manufacturer specialising in scientific instruments. That may not sound very exciting – but from an investment perspective, I think that it is.

Here is why. Judges applies strict criteria to buying small makers of instruments that come up for sale, for example when the founder retires. So while the firm skips overpriced deals, it is able to buy some quality companies at competitive valuations.

By bringing them into a wider organisation, Judges can supply capital and management expertise to help accelerate growth in a cost-effective way.

But why are scientific instruments an attractive industry to start with? The reason is that precision (and therefore quality) matters. That gives a manufacturer like Judges a Warren Buffett-style moat, plus pricing power.

Impressive financial performance

The proof of the pudding is in the eating.

While the Judges Scientific share price has performed well over the past five years, that simply reflects the impressive business performance over that time. In the five years to 2021, revenues grew 59%, adjusted operating profit was up 154% and the dividend increased by 140%.

There is a lot to like there, in my opinion. The revenue growth was solid. But I think what is more interesting is the way in which profit growth outpaced the increase in revenues. That suggests the Judges model of providing centralised services that can help subsidiaries grow, without increasing their cost base at the same pace, is delivering.

Not only do I think Judges’ model has delivered well, I think it could continue to do so. Demand for scientific instruments from users like industrial labs and universities is likely to be resilient even in an economic downturn.

But there are still risks. Inflation could eat into profit margins. Ongoing travel restrictions for some markets like China could also hurt sales as engineers may not be able to do site visits and install instruments.

Why I’d still buy this growth stock

Still, Judges has seen its share price increase by 272% in the past five years. Although the past year’s increase of 9% was far more modest, Judges has clearly rewarded long-term shareholders handsomely.

It now trades on a price-to-earnings ratio of 38. That is quite a bit pricier than I would normally consider when buying shares for my portfolio. Yet I would be willing to buy. Why? I think it has the hallmarks of a classic growth stock. It benefits from a focused, smart business model meeting real customer needs in a way that gives it pricing power. Unlike some growth shares, though, Judges is consistently profitable. I believe its distinctive business model can deliver more earnings growth in future.

But sometimes, a dividend share attracts me despite a small current payout — because of what I think it might deliver in future.

Focussed business model

An example of this is Judges Scientific (LSE: JDG). If you have never heard of this company, you are not alone. It operates in a niche sector, supplying scientific instruments to customers like universities, commercial labs, and research agencies.

The company management figured out that this industry is highly fragmented. In other words, there are lots of instrument makers that are very small. Some have just a handful of employees, and when the owner retires they may simply wind up the business.

That presents an opportunity for a company like Judges. With limited competition from other bidders, it is able to buy many such small manufacturers at attractive valuations. Focussing on a single area helps to grow Judges’ expertise. So it can help the companies it acquires with things like strategic advice and access to capital. Aside from that, it tends to leave them alone to focus on what they do best.

Profit potential

So far, so good. But what makes this business model attractive from an income perspective?

When it comes to scientific instruments, accuracy and reliability are the name of the game. That means that purchasing decisions tend not to be driven by cost. Instead, customers are looking for a very high level of quality.

That gives a company like Judges pricing power. It can set prices without worrying too much about competition from low-cost producers, for example. By building a reputation for product quality in a specialist area, over time its revenues have grown but not at the cost of attractive profit margins.

Dividend share with growth potential

Last year, the firm made post-tax profits of £13m on revenue of £91m. That sort of profit margin attracts me. As it continues to grow through its acquisitive strategy, I reckon Judges can hopefully keep growing earnings.

At the moment, the dividend yield is only 0.9%. That is low and not especially attractive to me. But what I do like is Judges’ aggressive approach to growing the dividend. Last year saw dividend growth of 20%. The year before was a more modest but still impressive 10%, while before that the payout had increased by 25% for two years in a row.

Past performance is not necessarily indicative of what will come next. But I think Judges’ history of double-digit percentage dividend increases reflects the lucrative nature of its business model. Admittedly, that may not continue. Ongoing pandemic restrictions in some markets may lead to sales being postponed or cancelled. Other companies could copy Judges’ business model, pushing up the purchase price for acquisitions and hurting profit margins.

But so far, Judges has impressed me with its strategy and ability to deliver strong dividend growth. I would consider buying this dividend share for my portfolio not because of its current yield, but the potential for ongoing growth in the payout.

Refurbishing my Stocks and Shares ISA

The ongoing consumer spending crunch doesn’t place home improvements high on the priority list. However, the demand for these products and services isn’t likely to disappear. Beyond the current government initiatives to accelerate new home construction, millions of additional properties are in dire need of repairs.

Approximately 20% of all English homes today were built before World War One. And even with a plethora of new properties entering the market each year, the average age of a house is still hovering around 40.

That’s what’s brought Howden Joinery (LSE:HWDN) onto my radar. The vertically integrated group is known for its expertise in trade kitchens. However, it’s also a leading supplier of joinery products, construction hardware, as well as fitted bedrooms, bathrooms and conservatories, among others.

The ongoing supply chain disruptions have impacted operations resulting in shares of this UK business taking a 16% tumble in the last 12 months. But since these are ultimately short-term problems, the reduced-price tag looks like a buying opportunity for my Stocks and Shares ISA. At least that’s what I think.

Accelerating science with UK shares

An often-forgotten requirement for innovation is scientific research. And while there are countless companies investing capital in the pursuit of new discoveries, the process requires special equipment that’s not easy to come by. It’s undoubtedly a niche market segment, yet Judges Scientific (LSE:JDG) seems to be dominating.

The company owns a vast collection of subsidiaries specialising in the development and manufacture of scientific equipment. Its products range from fire testing all the way to high precision motion control for particle physics labs.

Admittedly, the complex nature of these tools does add a potential pitfall if quality standards aren’t maintained. But with the UK business delivering double-digit revenue, profit and dividend growth, that’s a risk I’m willing to take with my Stocks & Shares ISA.

Gaming still dominates post-Covid

During the 2020 lockdowns, gaming stocks were all the rage. After all, people needed something to pass the time, and video game companies happily obliged. And although most have returned to work, the demand for this entertainment medium continues to grow.

Video game developers often invest considerable capital into these digital projects. And if a title ends up being a flop, it can be the death of an entire firm. Needless to say, that adds a lot of risks.

Fortunately, Keywords Studios (LSE:KWS) is less exposed to such threats. The company provides support and talent services to the world’s largest video game developers. And since its income is not dependent on the financial success of finished titles, it’s seemingly in a much stronger position than most.

The group has deployed an acquisitive growth strategy that’s enabled it to reach dominant status. There is the ongoing risk of an acquisition going wrong, but management has been prudent in its targeting process. That’s why I think this could be one of the best UK companies to add to my ISA today.

Diageo

Increasing income could be worth raising a glass to celebrate. When people do that, with drinks from Guinness to Baileys, it helps boost sales at drinks giant Diageo (LSE: DGE).

The company behind many famous names on bar shelves around the world has an attractive record when it comes to boosting dividends. It has done that each year for over three decades. What helps fund this growth? Partly it is the attractive profit margins of the alcoholic beverage industry. But I think Diageo’s careful management and development of a range of premium brands also helps its profitability.

Whether that can continue depends partly on customers being willing to pay for a premium tipple. One risk is a decline in alcohol consumption in some markets, although Diageo is trying to combat that by extending its non-alcoholic offering. I think the firm’s brand portfolio and global reach could be good for future profits – and hopefully dividends too.

DCC

Another consistent dividend grower is DCC (LSE: DCC). The company operates in a variety of businesses including gas distribution.

The dividend has long been a high priority for DCC management. The company has raised its dividend annually for over a quarter of a century. Those rises have been sizeable, with double-digit percentage increases in each of the past couple of years. Currently the yield is 3.1%.

What does the future hold for the dividend? A decline in the use of bottled gas in some markets could hurt both revenues and profits at the firm. But I think its range of businesses helps give it a diversity of income sources. I like the importance DCC attaches to its dividend and would consider buying it for my portfolio.

British American Tobacco

Another company that has raised its dividends annually for decades is British American Tobacco (LSE: BATS).

Lately the increases have been small and the company has started using some of its excess cash to buy back its own shares. But although the growth rate may have slowed, I see ongoing potential for dividend increases at British American. It is a highly cash  generative business.

A risk I would consider here is a declining number of cigarette smokers leading to falls in both sales and earnings. The company is developing non-cigarette product ranges, but so far their profitability looks much less attractive than that of cigarettes. For now at least, there is still enough demand for cigarettes to help support a growing dividend. I see British American among the UK shares to buy now for my portfolio.

Judges Scientific

Judges Scientific (LSE: JDG) manufactures specialist equipment like microscopes. But no such device is needed to measure recent increases in its dividend, as they have been large. Last year, the dividend grew by 20% compared to the prior year. Indeed, the dividend has more than doubled over the past four years.

One risk to the company is ongoing delays in getting access to some sites for installations in markets where pandemic restrictions remain in place. That could hurt sales and profits. I would also like it if Judges had a higher yield – at the moment, it stands at just 0.8%. If my focus was not on yield but on prospects for ongoing dividend growth, though, Judges Scientific would make the list of shares to buy for my portfolio.

Legal & General

With a 7% yield, adding Legal & General to my portfolio could provide a juicy boost to my passive income streams. But I also think the insurer could be a good choice for me when it comes to dividend growth. It has already set out its plans to grow the dividend annually over the next several years.

No dividend is ever guaranteed, of course, and the financial services firm does face risks. For example, changed rules on renewal pricing for insurance policies threatens to dent profits. But I think there is a lot to like about the Legal & General investment case. Its strong brand, large customer base and deep experience could help the company do well in the future.

Cranswick

Meat producer Cranswick (LSE: CWK) may not be a household name, but its products are stocked under a variety of names in many thousands of shops.

Cranswick has spent decades developing its product range. So it is not simply a meat supplier charging commodity prices. Through its processed products, it is able to charge premium prices. That can be good for profits – and dividends.

Indeed, in its preliminary results yesterday, the company announced that it had maintained its operating margin at 7%. I was pleased to see that, as disruption in the meat supply chain is an ongoing threat to profitability. Earnings per share increased by 11%.

The company also announced an 8% increase in its dividend. This is the 32nd consecutive year of dividend increases. I think the company’s strong business prospects bode well for future growth. That is why Cranswick is on my buy list of UK shares.

Unilever

The final name on my list of seven shares to buy is Unilever.

Inflation could push up costs at the consumer goods giant. But that is where I think it can benefit from its portfolio of premium brands, such as Dove, giving it pricing power. Evidence of that came in its first-quarter results. Sales volumes slipped slightly, but revenues grew due to price increases.

Unilever pays quarterly dividends. I think its large, diversified business should provide robust revenues in the next few years even in the face of an economic slowdown. That should help it support dividend increases.

No dividend is ever guaranteed. But by spreading my investment over seven different companies in a diverse range of business sectors, I would hopefully see at least some of them raise their dividends in coming years. That is why I would buy them now.

Judges Scientific

A growing company based on the Buffett approach is how I would describe Judges Scientific (LSE: JDG). The firm buys small scientific instrument makers at attractive valuations, then largely leaves them alone to get on with what they do best.

For such instruments, accuracy matters. So customers are willing to pay premium prices. Demand is likely to remain strong, although one short-term risk I see is the continued shutdown of some facilities due to the pandemic leading to sales being postponed or cancelled.

In recent years, percentage dividend growth has consistently been in the double-digits. Last year the dividend went up 20%. While the price-to-earnings ratio of 28 is not cheap, I find the share price more attractive than a few months ago. I am keeping an eye on Judges as at the right price, I would be happy to buy it.

Cranswick

Another dividend growth share I am eyeing for my portfolio is Cranswick (LSE: CWK). The company produces a range of foodstuffs, such as fresh pork and cooked meats. In the past five years, revenues have grown at a compound annual rate of 13%. Adjusted earnings per share grew even faster.

On the dividend front, the five-year compound annual growth rate was 13.3%. Cranswick also has an impressively consistent record of raising its dividend annually. The payouts have gone up each year since the early 1990s.

Past performance is not a guide to what will happen next. But I reckon growing demand for meat in developing markets means that the company can continue to grow revenues. A shortage in some markets could help maintain attractive profit margins. If that leads to a glut of meat production, profits could fall in future. But at the moment, I would consider adding this proven dividend growth share to my portfolio.

Diageo

More modest dividend growth is the norm at brewer and distiller Diageo. Last year it saw dividend growth of 3.8%.

Like Cranswick, the company has raised its dividend annually for decades. That reflects the pricing power the company enjoys, as well as its continued push into new markets. By building a portfolio of premium brands such as Guinness, the company has been able to encourage customer loyalty even in the face of price rises. So while cost inflation poses a risk to profits, over time I reckon Diageo ought to be able to maintain attractive profit margins. That could help keep dividends growing.

Building dividend growth into my portfolio

I like the prospect of owning shares with strong dividend growth potential. But I also consider yield. While Judges has been growing its dividend, for example, the yield remains below 1%.

But each of these three shares has what I see as an attractive business model I think can help support dividend growth in future. If I can buy them at an attractive valuation, I would be happy to hold them in my portfolio.

So, let’s explore three UK shares I think are great buys for my Stocks and Shares ISA £20,000 allowance.

A future leader in digital marketing?

dotDigital (LSE:DOTD) is one of many UK shares I’m keen to buy now. The group provides a cloud-based marketing automation platform. Clients can create and distribute targeted marketing campaigns to existing and prospective customers to boost product sales or service subscriptions.

The stock has taken quite the beating over the last 12 months, falling by around 18%. Yet despite this lacklustre performance, revenues hit a new all-time high and continue to surge annually by double-digits.

This is far from a risk-free business, of course. With scrutiny surrounding data privacy from governments, and companies like Apple limiting data gathering systems, dotDigital’s platform may start losing its data-driven edge.

However, with a track record of successfully adapting to such restrictions in the past, such as GDPR, I believe the company can do so again.

One of the best UK shares to buy now?

Judges Scientific (LSE:JDG) shares have experienced quite a tumble in recent months. While the stock is still up by around 9% in a year, since the start of 2022, it’s actually down by nearly 15%.

This business is a designer and manufacturer of scientific instruments used throughout countless industries and applications, from testing electric car batteries to running experiments at CERN.

While it’s undoubtedly quite a niche field, the group’s impressive track record of acquisitions has made it arguably a leader within its space. And excluding 2020, profits have been growing by an average of 66% annually since 2017!

But like all businesses, there are risks. With many of its customers being supported by government subsidies, budgets are largely at the mercy of local economic health. Needless to say, the pandemic hasn’t exactly created the best environment for that.

Future economic downturns will remain an ever-present threat to this business. But with an established portfolio of brands, I remain confident that Judges Scientific is one of the best UK shares to buy now for my Stocks and Shares ISA.

Becoming Amazon’s landlord

With e-commerce adoption being accelerated courtesy of global lockdowns, the demand for high-quality well-connected warehouse space has skyrocketed. That’s proven to be quite a favourable tailwind for Warehouse REIT (LSE:WHR), and it’s why it’s one of my best UK shares to buy for my portfolio.

The business model is pretty simple. It buys dilapidated well-positioned properties, spruces them up, and then rents them out at a higher price to e-commerce businesses like Amazon. The profits are then returned to shareholders through a sizeable 4% dividend yield.

It does face some serious competition. And with relatively low barriers to entry, competitors could start heating up bidding wars for new locations. But given its consistent track record of performance, I think this stock could be an excellent addition to my portfolio.

The deadline to maximise my Stocks and Shares ISA is fast approaching. And now seems like the perfect time to explore such opportunities. With that in mind, here are two penny stocks that I think could be risky, but lucrative, candidates for my portfolio.

Profiting from scientific innovation

Scientific experiments lie at the heart of research & development for engineering and pharmaceutical-led firms. Most of this can’t be completed without the proper equipment. That’s where Judges Scientific (LSE:JDG) steps in. The company is a designer and manufacturer of specialist scientific instruments used worldwide, from the perfume labs of L’Oréal to the CERN supercollider.

This market is highly fragmented, with many players specialising in different fields. However, Judges Scientific is fairly unique since it targets a wide range of applications thanks to being a serial acquirer of pre-established businesses.

This bolt-on strategy has proven to be highly lucrative for the penny stock, with profits growing by an annual average of 27% since 2017. And that includes the adverse effects of the pandemic and subsequent supply chain disruptions.

Of course, acquisition-based growth strategies come with their fair share of risks. Suppose management makes a series of poor decisions, and newly acquired firms fail to meet performance expectations? In that case, its impressive growth track record could come grinding to a halt while simultaneously compromising its balance sheet.

Despite this threat, the penny stock seems to have prudent leadership at the helm. And with the need for scientific instruments unlikely to disappear any time soon, I think this business could be an excellent addition to my portfolio.

A penny stock with explosive potential

Staying on the theme of science, Solid State (LSE:SOLI) is another penny stock that caught my attention this week. The group is a designer, manufacturer, and supplier of electronic devices and components to the defence, energy, medical, and transportation industries.

Historically, Solid State has targeted small and medium-sized businesses. It handles projects too complex for clients to perform in-house but too small for the larger electronics companies to be interested in. However, following a series of recent acquisitions, the firm has drastically expanded its product portfolio and manufacturing capacity. And it’s already landed multi-million dollar contracts with clients like BAE Systems as a result.

With profits growing consistently by double-digits over the last five years, even during the pandemic, I’m not surprised to see the stock climb nearly 60% in the past 12 months. But even with this impressive track record, there remain plenty of risks ahead.

The most prominent threat at the moment seems to be supply chain disruptions. With the cost of raw materials increasing and availability running thin. Solid State may start losing customers to larger electronics firms with more robust supply lines.

Despite this risk, the growth opportunity looks highly lucrative, in my opinion. And that’s why I’m considering this penny stock for my portfolio.

The talent behind AAA video games

Keywords Studios (LSE:KWS) isn’t the best-known game development studio. Yet it has its hand in most of the big-budget titles released each year. The company provides talent services to larger studios, working on franchises, including Microsoft‘s Halo and Activision Blizzard‘s Call of Duty.

Despite delivering record-breaking growth in 2021, shares of Keywords Studios are actually down by around 5% over the last 12 months. The full-year results are scheduled to be released at the end of March. But looking at the latest trading update, revenue and profits for 2021 are expected to come in at €512m (£425m) and €86m (£71m), respectively.

By comparison, those figures are 37%% and 300% higher than in 2020. And since the pandemic only drove up demand for the group’s services, these figures are significantly ahead of 2019 levels as well.

This is by no means a risk-free investment. Management does have quite an aggressive, acquisitive growth strategy that could cause problems in the long term if acquired studios fail to meet performance expectations. But given the results achieved so far, I feel this is a risk worth taking. And with the shares currently down, now could be the best time to buy for my portfolio.

Are these the best shares to buy right now?

Unlike Keywords Studios, Judges Scientific (LSE:JDG) has had a fairly decent run of late. Over the last 12 months, the speciality scientific equipment developer has watched its shares climb by over 20%. But that would have been higher if it weren’t for the recent sell-off.

Last month, CEO David Cicurel sold a whopping £3.2m worth of shares in this business. And unsurprisingly, investors freaked out, sending the stock into a double-digit decline. But I think the market may have overreacted here. Even after this sale, Cicurel still owns over 10% of the shares outstanding.

To me, that signals his faith in this business remains strong. And looking at the latest trading update, it’s easy to see why. Organic order intake jumped 25.1% higher than a year ago and 8.5% higher than pre-pandemic levels, setting a new record. Consequently, management is now expecting earnings to come in higher than initially anticipated.

That certainly sounds promising to me. And it’s why I think these should be some of the best shares to buy right now. But even with the recent decline, I can’t deny the group does trade at a lofty valuation.

As it stands, the price-to-earnings ratio sits at a sizable 49. The group has historically carried a notable premium, but this does open the door to volatility like that seen last month. Yet I remain optimistic about this business’s future. So, despite this risk, I’m tempted to add some shares to my portfolio ahead of the earnings release in March.

The culmination of inflation and rising interest rates has built up a significant degree of uncertainty. And as history has proved time and time again, uncertainty and growth stocks don’t work well together. But this may have created excellent buying opportunities for my portfolio. So, with that in mind, let’s explore two UK shares that I’m thinking of buying right now.

Building wealth with science

Judges Scientific (LSE:JDG) is quite a niche business. It develops scientific instruments used throughout various industries, including pharmaceutical, automotive, even telecommunications. One example would be its tools for testing heat profiles of lithium-ion batteries to verify product safety.

Over the last 12 months, this UK share has delivered an impressive return of around 20%. Yet since the start of the new year, it’s down by about 10%. What happened?

The drop-off seems to have been triggered by CEO David Cicurel after he sold £3.2m worth of shares. Seeing a director offload a large chunk of ownership is not exactly an encouraging sight. After all, it does suggest the valuation may be too rich. And with tensions already running high thanks to the volatile markets, I’m not surprised to see the stock take a hit.

But I think investors may have overreacted. There are plenty of reasons why a director might sell part of their position. And Mr Cicurel still owns over 10% of the company. If he is willing to hold on to such a stake in the business, that signals to me he believes the group can continue to deliver impressive performance. That’s why I think shares of this UK business could be some of the best to buy now for my portfolio.

An oversold UK share?

Staying on the theme of oversold stocks, Frontier Developments (LSE:FDEV) could be another in this category. Unlike Judges Scientific, its 12-month performance has been fairly abysmal, with shares of the UK game development studio collapsing by nearly 60%. Even since 2022 started, the downward trajectory has continued.

This rapid sell-off was triggered last year after management announced it was cutting guidance due to underperforming sales of its recently released Jurassic World: Evolution 2. Generally, when a growth company announces slowing growth, it’s not a good sign, leading to investors making their displeasure known. And Frontier was no exception. But are these UK shares now on discount?

As frustrating as slowing growth is to see, this may only be a temporary issue. The lower post-launch sales volumes for the group’s new game were isolated only to the PC platform. And with the new Jurassic World movie being released later this year, sales are expected to pick up very soon.

Meanwhile, with other titles in the pipeline scheduled for release over the next three years, the top line could soon be expanding at an accelerated pace. That’s why I’m considering adding more of these shares to my portfolio.

So when Buffett talks about shares being cheap, he is not referring only to their price. Instead, he is looking at what they cost and then comparing it to how much value he thinks they may generate in future. As a private investor, I see that as a lesson I can apply to my own portfolio.

Hunting for value

How does Buffett try to judge the future value a share may generate? It is an imprecise science. But basically he estimates what free cash flows a company can generate in future, per share. It is easier to create such cash flows in the long-term if a company has unique assets that allow it to charge a premium price. For example, it may have a proprietary product formula like Coca-Cola or an entrenched customer base like National Grid.

Future cash flows also rely on future demand. There is little point in a company having a unique edge in an industry that is about to become extinct. That also can be hard to assess, especially with the fast pace of technological development. Buffett reckons some goods or services will remain in demand no matter what happens. For example, people will still need to buy food. They will still need healthcare.

Warren Buffett pays close attention to such enduring industries. He also applies another principle when trying to select shares that have long-term potential. He only invests in businesses he understands. By staying inside his ‘circle of competence’, the Sage of Omaha reckons he is better able to judge what the future prospects may be for a company. I can apply the same approach no matter how small my portfolio is.

After considering a company’s possible future free cash flows, Buffett looks at its share price. The lower it is compared to a company’s future cash flows, the more interested he is likely to be. Estimating those cash flows in detail can be difficult. So Buffett pays close attention to business assets he thinks might help generate lots of cash, such as iconic brands or distribution networks a competitor would struggle to match.

Looking for cheap UK shares

I think this method can help me identify cheap UK shares like the US ones that form most of Buffett’s portfolio. That is because the underlying principles are basically the same on both sides of the pond. Drivers of long-term value such as an iconic brand or unique technology are relevant to business success in the UK as much as the US. The gap between a company’s likely future free cash flows and its current price can help me identify value in either market.

Applying the Buffett approach, I would consider adding three UK companies to my portfolio. Given their future earnings growth potential, they look cheap to me right now.

Unilever

Buffett actually made a bid for Unilever (LSE: ULVR) a few years ago, although his approach was unsuccessful. Today I can pick up Unilever shares at a lower price than Buffett offered.

The underwhelming performance of the Unilever share price in recent years reflects some challenges that continue to threaten the business. For example, cost inflation may lead to profit margins being squeezed. Consumers tightening their belts in struggling economies could cut demand for Unilever’s premium brands like Dove.

But I think such brands are also a source of long-term competitive advantage. That could help Unilever continue to produce strong cash flows for decades to come. Buffett is a big fan of premium consumer brands. Unilever owns a portfolio that it would be almost impossible for a competitor to replicate from scratch. They are used by billions of people daily. That is why I have taken advantage of recent share price weakness to add the company to my portfolio.

Victrex

Another example of a company with the sort of competitive advantage or ‘moat’ that Warren Buffett likes is Victrex (LSE: VCT). The industrial firm supplies business customers with polymers. These are used in a range of applications, including in cars and planes.

Victrex has its own product technology. That gives it a unique place in its market. The products are used in situations where safety is critical. That allows Victrex to charge premium prices, helping to support profits.

This all adds up to an attractive business model in my view. But there are risks too. Victrex has a concentrated manufacturing footprint. So any unexpected shutdown at its main factory could seriously reduce revenues and profits. Like Buffett, I try to reduce my risks by diversifying across different companies. I would therefore happily add Victrex to my portfolio, alongside other companies.

Judges Scientific

A company that reminds me of Buffett’s own Berkshire Hathaway is Judges Scientific (LSE: JDG). Judges does not have a wide spread of businesses like Berkshire. But it uses a similar business model in which a small central office buys subsidiaries and allocates capital between them. That helps to keep overheads low. But the company’s focus on the scientific instrument market means it can charge premium prices. Similarly to Victrex, catering to applications where quality is crucial means that customers are willing to pay high prices.

This is a lucrative business. Judges has delivered double-digit percentage dividend increases in recent years. One concern I have is the low barriers to entry in building a copycat business. A competitor attracted by Judges’ profit margins could aim to build a similar holding company by bidding for the sorts of assets Judges has been targeting. If that happened, it could push up acquisition costs and harm margins.

Judges’ management has proven the potential of its business model so far. Given Judges’ strong growth prospects, I see the shares as offering value. I would consider adding them to my portfolio.