Last week, the Financial Times’ personal finance editor Stefan Wagstyl noted the pound’s precipitous plunge against the dollar before recommending readers sell off FTSE stocks and load up on foreign securities.

She wrote: “The global equity sell-off has hit the UK far less hard than rivals…UK equities have done much better, with the energy-heavy FTSE 100 slipping a mere 3%.

“So this could be the moment to take profits at home and invest abroad.”

There’s nothing wrong with investing abroad, but in my opinion, UK investors who are worried about the pound’s weakness needn’t look overseas.

Here is a UK stock that could actually benefit from a weaker pound.

A chance to earn in foreign currencies?

Victrex (LSE:VCT) produces polymers that are sold in over 40 countries, although its manufacturing facilities are based in the UK.

Last year, revenue generated in the UK made up less than 1% of Victrex’s revenue, allowing the company to profit from the pound’s fall against other major currencies.

The company is a world leader in the production of polyether ether ketone (PEEK) polymers, which are incredibly hardy and capable of conducting electricity – making the lightweight thermoplastic a candidate to replace clunky metals in many industrial applications.

PEEK polymers are used in hundreds of engineering applications – for example, to make bearings, piston parts, pumps, HPLC columns, compressor plate valves and cable insulation.

But priced at 18 times expected earnings and with a moderate dividend yield of 3%, Victrex doesn’t really look like a screaming buy at first glance to me.

In addition, the company’s profits have been sliding over the last few years, with EBITDA down from £146m in 2018-19 to £110m in 2021-22 – and in May this year, the company reported that cost inflation had compressed operating profit margins.

Ready for the times to get better…

But Victrex could be on the cusp of turning things around, with the applications for its PEEK polymers still expanding. After all, the material was only invented around 40 years ago, leaving time for plenty more use cases to be discovered.

An ongoing clinical trial is testing out PEEK polymers in knee-replacement surgeries, for instance.

Meanwhile, PEEK polymers are likely to enjoy tailwinds from the green energy transition, with potential uses in electric vehicles and their charging infrastructure, as well as in wind turbine components and in the infrastructure for storing and transporting hydrogen.

For that reason, I think Victrex is far more likely to be going through a temporary malaise rather than a terminal death spiral.

So, with sunnier days possibly ahead for the company, as well as revenue sources coming from more than 40 international markets, I see Victrex as a good stock to hedge my portfolio against further weakness in the pound – as it earns in foreign currencies while reporting in pounds. 

Tesco

In a recession, people still need to eat, drink, and brush their teeth. So I expect demand to remain high for grocery shops. Some shoppers may turn to discounters such as B&M. But supermarket giant Tesco (LSE: TSCO) is a much larger operation and has spent years focussing on its own price messaging. That is a defensive quality I like about the company.

A recession could change what people buy, threatening revenues and profits. But if they switch from premium brands to the supermarket’s own label products that may actually be positive for profits at Tesco. Its large branch network and vast digital sales make it the leader among supermarkets when it comes to sales. That can help it benefit from economies of scale, providing a competitive advantage in a recession.

Tesco has a dividend yield of 4.2%. I would happily buy Tesco shares to hold in my portfolio.

Victrex

The specialist industrial manufacturer Victrex (LSE: VCT) is another share I would happily own in a recession. It makes polymers that are used in things like cars and planes. So, even when the economy contracts, its customers should still be willing to pay for the right quality of product. On top of that, as Victrex has patents on some polymer technologies it uses, competition is limited.

A recession could bring challenges, especially if soaring energy costs eat into profit margins. But that is where the sort of pricing power offered by Victrex’s business model should come into its own. Over time, I think the firm could raise prices to help sustain its profit margins.

The shares have tumbled 32% in a year, so apparently investors reckon that the coming period could be a tough one for Victrex. But I see the long-term investment case here as robust and would consider buying the shares for my portfolio. The fall in share price has pushed Victrex’s dividend yield up to 3.4%.

Carr’s Group

The agricultural supplier Carr’s Group is another company I would consider as the economic storm clouds gather. Farmers are old hands at dealing with all sorts of conditions, and to do that they need things like animal feed and fuels year in and year out. Carr’s has deep relationships in many farming communities and I expect it to maintain robust sales no matter what happens to the economy.

There are still risks. Stiff cost inflation on items like fertiliser might be hard to pass on fully to customers, so the company may either see some revenues fall or have to settle for thinner profit margins. But I expect the business to maintain healthy sales. Its 1.8% dividend yield is modest but still attractive to me.

Victrex

Victrex (LSE: VCT) may not be well-known, but its customers tend to be large industrial companies. It makes polymers that go in everything from cars to spacecraft.

There are a couple of things about the business that attract me. The first is that the applications to which its products are put are often mission critical. When safety is a consideration, customers are more likely to focus on quality than on cost alone. That gives UK-based Victrex the ability to compete against producers in lower-cost countries. Secondly, the company is a leader in certain polymer technology and has patents on some products, meaning that competitors cannot make them.

That adds up to a recipe for business profitability and last year, post-tax profits came in at £73m. While that was higher than the year before, it remains well below what the company managed in the years before the pandemic. Ongoing supply disruption remains a challenge for the company, along with cost inflation and soaring energy bills. Those things could help keep the share price depressed in the next couple of years.

That makes me regard it as a good stock to buy now for my portfolio. The long-term prospects for Victrex look sound to me. Over time, I expect supply chain issues to get better and inflation to become more manageable without hurting profit margins. The shares offer me a 3.3% yield and I think there is the prospect for share price growth in coming years.

Victorian Plumbing

Digital bathrooms, kitchens and plumbing merchant Victorian Plumbing (LSE: VIC) has also been suffering from investor concerns about the impact of inflation on its profit margins. Another concern is whether demand will fall, hurting revenues. Whereas Victrex’s customers have little choice as to whether or not they need polymers, Victorian Plumbing is selling what in some cases is a discretionary product. If inflation starts to bite household budgets, many people may put a planned bathroom renovation off for the foreseeable future.

That is weighing heavily on the Victorian Plumbing share price, which has fallen 82% in the past year. Yet like the chief executive, who has been purchasing shares lately, I see this as a buying opportunity for my portfolio. The company is profitable and has expanded its customer base over the past couple of years. Its asset light model means it does not need lots of capital to keep growing.

I see both of these companies as having attractive investment cases. I have added them to my portfolio and am hoping to see possible share price growth from them in the coming years.

With £300, I would put £150 into each, sit back and hope to see the businesses do well.

Here are a handful of candidates I would consider for my portfolio.

Unilever

The consumer goods company Unilever (LSE: ULVR) has not had an easy couple of years. Like its industry peers, the company has been struggling to deal with high inflation on things like ingredients and packaging. Although its premium brand portfolio gives the company pricing power, it may not be able to pass all of these costs onto customers without losing some sales.

But zooming out to take a longer term view, I see reasons to like Unilever as a blue chip holding for my portfolio. The company has a lot of the attributes Warren Buffett looks for in a business. It operates in areas where demand is robust. Its business model has already proven itself to be profitable. The brands it owns give it a form of competitive advantage, or as Buffett would call it, a moat. Indeed, Buffett finds the Unilever business so compelling that he tried to buy the whole company a few years ago.

Since then, the Unilever share price has drifted south. I can now buy shares for my portfolio at a cheaper price than Buffett offered – and he is not generally known for overpaying. The falling share price has also pushed up the dividend yield. It now stands at 4%. For a blue chip FTSE 100 company like Unilever, I regard that as attractive. I would happily buy more now to hold in my portfolio.

Victrex

One share I have bought for my portfolio this month after eyeing it for a long time is polymer maker Victrex (LSE: VCT).

So, why did I finally make the move? Basically, a fall in the Victrex share price meant that I liked the value it offered my portfolio for the long term. The shares have fallen 24% over the past year.

Such a share price fall rarely comes out of thin air, however. Investors are concerned that the sharp increase in energy costs and other input prices could harm Victrex’s profit margins. Its almost total reliance on export markets is also a risk, given ongoing logistics challenges both in Europe and further afield.

But Victrex is another company I reckon has a Buffett-style moat. It is regarded as one of the leading suppliers for its type of polymers. Indeed, as some of its products are proprietary, Victrex is the only company that can make and sell them. That gives it pricing power. The sorts of applications they are used for makes them mission-critical, so customers are willing to pay for quality.

While I expect inflationary pressures to ease over time, the attractive underlying economics of the business will hopefully remain the same. That is why I have tucked them into my portfolio.

Legal & General

The insurer and financial services group Legal & General (LSE: LGEN) has also seen its shares lose steam lately. With a fall of 8% over the past year, the slide has been less dramatic than at Victrex. But one effect has been the same – pushing up the dividend yield. At Legal & General, that now stands at 7%.

On top of that, the company has set out plans to keep raising its dividend in coming years. That is not guaranteed. During the pandemic, the firm paused its previously progressive dividend policy. A serious downturn in demand may lead it to cancel or cut its dividend, as it did during the financial crisis.

However, just like Victrex, I think the underlying economics of the business make it an attractive potential addition to my portfolio from a long-term perspective. I think there will continue to be high demand for insurance. The firm’s iconic multi-coloured umbrella logo helps attract and retain new customers. The company has a proven ability to underwrite insurance at profitable rates. Its large customer base also gives it an opportunity to sell a wider range of financial products to customers. That could boost revenues and profits.

Tesco

Another company that has to struggle with cost inflation and logistics challenges is supermarket giant Tesco (LSE: TSCO).

However, people will always need to eat. Tesco is the biggest supermarket chain in the land. It faces pressures from discounters such as Aldi and Lidl. That could eat into profit margins, but one benefit I see is that it forces Tesco to keep its prices competitive. That should be good for its continued attractiveness to customers. Unlike the discounters, it also has a massive digital business that offers future growth opportunities.

The company recently increased its annual dividend by 19% and now yields 4%. I think the growth opportunities here are modest, but if Tesco can simply try and maintain its market leadership that should be enough to generate sizeable profits in future. That could fund more dividend increases. From a buy and hold perspective, I would consider putting Tesco shares in my basket.

British American Tobacco

Finally, with an eye on income, I would happily buy more shares in British American Tobacco for my portfolio.

Like Tesco, I see only modest growth opportunities here. The non-cigarette business has strong growth potential, but that may be largely offset by declining cigarette sales. However, I find the shares attractive because the company’s large sales produce big free cash flows. That helps support the dividend. British American has raised its dividend annually for over two decades and yields 6.6%.

Dividends are never guaranteed and a decline in cigarette sales is a real risk to revenues, although pricing increases may help mitigate the impact on profits for the next few years at least.

My move on these shares to buy now

These five names from my list of possible shares to buy now for my portfolio attract me for different reasons. But what I like about them is that they are blue chip companies with sizeable, proven businesses I think can continue to make healthy profits in the future.

Victrex

If you have never heard of Victrex (LSE:VCT), that may be because it is focussed on business-to-business sales. But you will almost certainly have benefitted from some of its products, which form part of the fabric of everything from spacecraft to cars.

Such mission-critical applications mean that the company’s customers are willing to pay a premium for dependable quality. On top of that, Victrex’s deep expertise and unique processes in manufacturing certain types of polymer products give the company an additional competitive advantage.

Rising energy costs have raised the risk of profits falling at the company. The Victrex share price now stands 11% lower than it did a year ago. I see that as a buying opportunity to add these shares to my ISA and keep them there for the long term.

M&G

The investment manager M&G has had its doubters in the City. That helps explain why the firm has a dividend yield of 8.1%. One doubt was whether clients would move funds elsewhere, leading to lower profits and potentially a dividend cut.

But the company saw a net inflow of funds last year. It also delivered on its policy of maintaining or increasing the annual dividend. Dividends are never guaranteed, but I appreciated management sticking to their word. From an income perspective, the yield is very appealing to me. I hold M&G in my ISA and would consider buying more shares now.

Boohoo

A year ago, when boohoo (LSE: BOO) shares cost well over £3 apiece, the idea that the company would ever be a penny stock might have seemed like a bad joke.

But it has been a rough 12 months for the online retailer. Boohoo’s reputation has continued to suffer following earlier reports of poor labour conditions at some of its suppliers. Additional worries have piled up, such as the potential negative impact of higher material, labour, and delivery costs on profit margins. It issued a couple of profit warnings in the second half of last year.

There are clearly risks here. But I think investors may be paying too little attention to the fact that boohoo has a proven business model. It has delivered consistent revenue growth and profits in recent years. I think the underlying business case remains attractive and the shares now represent a bargain for my ISA. That is why I have stocked up on them this year.

Unilever

Another company that I can buy cheaper now than a year ago is consumer goods giant Unilever (LSE: ULVR). Its share price has fallen 14% in the past 12 months.

Like at boohoo, cost inflation is a risk to profitability at Unilever. But the company’s portfolio of premium brands gives it pricing power. That can help it pass such cost increases onto customers.

I think Unilever needs to fight to stay relevant amid changing consumer tastes. It is doing that partly by emphasising its environmental credentials. When I ask myself whether people will still be buying its brands such as Cif, Domestos, and Surf a decade from now, I reckon they will. So I have tucked Unilever into my ISA. The share price fall means the company now offers me a 4.2% yield.

Safestore

Late last year, among a list of top British stocks for 2022, I chose Safestore (LSE: SAFE). Disappointingly, it has lost 6% so far in 2022. That could reflect some profit-taking, though, as over the past year the Safestore share price has boomed by 68%.

I think the fundamentals of this business remain highly attractive. Demand for self-storage in the UK remains a fraction of what it is in the US. But some of the same growth drivers apply on both sides of the pond. Increased housing costs and flexible commercial rental trends mean that offsite storage is set to keep growing. With its well-established brand and large network of sites, I reckon Safestore could benefit from this. I do see a risk that low barriers to entry could hurt profitability across the industry as a whole. But for now business is brisk and the company raised its dividend 35% this year.

British American Tobacco

Another income choice for my ISA may be predictable, but it is no less appealing to me for that. British American Tobacco raised its dividend yet once more this year, as it has done annually across more than two decades. The shares now yield 6.7%. The first share buyback in a number of years was an additional sign of management confidence in the company’s prospects.

Those prospects remain challenged by the decline in cigarette purchase in many markets. Even the pricing power of the company’s premium brands such as Lucky Strikes can only do so much to help compensate for that when it comes to profits. But British American is seeing strong sales growth in its non-cigarette lines.

S4 Capital

I would consider adding more S4 Capital (LSE: SFOR) shares to my ISA right now, not least because the company is due to unveil its annual results this Thursday. Expectations are high given the fast growth seen so far at Sir Martin Sorrell’s digital marketing agency group.

S4 has already said it remains on track to double revenues and gross profits organically over a three-year period. That is quite a clip. But that is before taking into account the boost to growth prospects provided by bolt-on acquisitions.

Acquiring lots of companies fast adds cost and complexity at the corporate level. That is a risk to profits. But I remain excited about the growth story at S4 and hope its place in my ISA will be well justified.

My move before the Stocks and Shares ISA deadline

I would consider buying each of these shares in my ISA. The upcoming Stocks and Shares ISA deadline has focussed my mind, but in each case I see an investment case that lends itself to my long-term buy-and-hold investment strategy.

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.

The Victrex share price journey

Victrex is a British firm that produces high-performance polymers with a range of real world applications. The polymers designed and manufactured by Victrex are used in smartphones, aeroplanes, cars, medical devices, and oil & gas operations. Victrex’s speciality is the well-known hard wearing polymers known as PEEK. It has advanced technology over the years to become a world leader.

As I write, the Victrex share price is 2,430p. The share price is up 3% today, from 2,354p at the beginning of trading. This is due to positive full-year results announced this morning. Over the past 12 months, the shares have returned 16%, rising from 2,082p to current levels. The shares are up 3% year-to-date. 

FY results and outlook ahead

Victrex’s preliminary full-year results covered the 12 months ended 30 September 2021. The results made for excellent reading in my opinion. Group sales volume increased by 25% compared to last year which was to be expected due to heightened demand caused by reopening. Revenue and gross profit increased by 15% and 16%, respectively. The good results led to Victrex declaring a dividend of 109.56p per share. This is made up of a regular dividend and special dividend worth 50p. It is worth noting the dividend has surpassed pre-crash levels and gives Victrex a yield of 2.5%.

I can understand why the Victrex share price has jumped today based on such impressive results. The outlook ahead also seems promising. It reported good sales progress in all sectors as well growth plans. For example, progress has been made on one of its new manufacturing facilities in China. Victrex’s growth plans will be supplemented by a robust balance sheet. It can call on some of the £99.9m cash it has available.

Risks and my verdict

Despite the positive results, Victrex does have risks. Firstly, macroeconomic pressures could affect progress, growth, and performance. Rising inflation and costs could hinder margins and performance, especially if it cannot pass these rising costs on to its customer base. This could affect further dividends. Secondly, the pandemic halted progress in the past. New variants, such as the Omicron variant, could lead to a slow down of orders and growth.

Overall, the Victrex share price looks a bit expensive right now with a price-to-earnings ratio of 38. I do like the company and its place in its sector. It has also returned close to pre-pandemic levels of performance as well as paying a dividend that would make me a passive income. I would add shares to my portfolio if there were a better entry point to buy. For now I will keep a keen eye on developments.

FTSE 250 recovery play

Before mid-March, shares in high-performance polymer producer Victrex (LSE: VCT) had been reluctant to take part in the recovery. Since then, they’ve climbed almost 30% in value as demand has bounced back. Based on last Friday’s Q3 management statement, I think this momentum should continue.

Last week, the FTSE 250 company said that it had “delivered a strong quarter” over the three months to the end of June. Group revenue now looks to be back on track after last year’s disruption in all of the company’s markets.

Looking ahead, the resurgence in business seen to date and a “robust” order book for Q4 now mean full-year numbers should be closer to “the upper end of market expectations”.

Naturally, there are potential bumps in the road ahead. According to Victrex, these include rising prices of materials, currency headwinds and the inevitable need for ongoing investment. Moreover, the shares aren’t cheap at 32 times FY21 earnings (falling to 27 times in FY22).

However, Victrex’s quality goes some way to justifying this valuation. It had £88.3m in cash at the end of June, has now reinstated dividends and consistently posts great margins and returns on capital. 

I’m also excited by the company’s growth potential via its ‘mega programmes’. These include the use of the company’s PEEK products in new applications such as knee replacements. Last Friday, it was announced that five patients had now been implanted with ‘PEEK Knees’ via its partner Maxx Orthopedics. Although still early days, no issues have been reported so far.

Still around 20% below its all-time price high, I see more upside for this stock and would be comfortable adding to my current stake.

Share price momentum

A trading statement from FTSE 250 soft drinks giant Britvic (LSE: BVIC) is due later this month. Based on its performance in 2021 so far, I don’t think investors should have much to fear. Those buying in January will have already enjoyed a gain of around 20%.

Sure, the share price won’t double overnight and there’s an opportunity cost to consider. It can be tempting for me to prioritise racier stocks over one that should provide steadier performance.

Nevertheless, Britvic strikes me as a great, defensive pick and one I’d buy regardless of what economists and analysts were saying about interest rates, inflation and the like. It’s got a portfolio of easily recognisable, ‘sticky’ brands that shoppers both like and will buy through habit. This makes earnings far more predictable than your typical tech stock. There’s also a 2.4% yield, easily covered by profits, to consider.

Back in May, Britvic reported that trading in the first weeks of H2 had been “encouraging“. As such, some of the Covid recovery is surely already priced in. Even so, I think a full return to normality in bars, pubs and restaurants should allow it to breach its previous record share price high before too long.

I’d be happy to add Britvic to my own portfolio today. 

Industrial moat

Victrex (LSE: VCT) manufactures polymers, which have a wide range of industrial uses.

Some of Victrex’s polymer technology is proprietary. The importance of their applications in industries such as aerospace and automotive means that customers are willing to pay for high-quality products. That helps to protect the company from lower cost competition.

After a challenging 2020, last month’s interim results were mixed. Sales volume rose 5% versus the prior year period, but revenue slipped slightly. Reported pre-tax profit fell 7%. So, why do I see these as UK shares to buy now?

The company restored its dividend and reported a strong pipeline of “mega programmes”, which could boost sales. With its specialist focus, Victrex has the sort of competitive moat investor Warren Buffett reckons can help generate profits for decades.

But with a new plant due to open in China next year, the company’s risk profile has changed. Any teething problems at the factory as it starts operations could bring additional costs, reducing profits.             

B&M

The discount retail chain B&M saw sales surge during the pandemic. Revenues last year rose 26%. Pre-tax profits rose 109%. Those strong figures might not be repeated in future. But I continue to see B&M as a UK stock to buy now for my portfolio.

B&M’s retail formula attracts customers with branded products at competitive prices. By rotating stock regularly, it motivates customers to come back frequently. As the profits surge last year proved, management runs a tight ship. It knows how to make lots of money piling things high and selling them cheap.

I think the company’s growth could continue for some years. But one risk is what the company describes as “highly competitive retail markets” both in the UK and France, where it also operates. That could squeeze profit margins.

UK shares to buy now: Galliford Try

The construction group Galliford Try is a smaller version of its former self. It now has a sharper focus on public construction projects. Its disciplined approach to bidding for work will hopefully support attractive profit margins in future.

Galliford Try also has the appeal of being cash rich. Its half-year results in March revealed a net cash position of £211m. That is higher than today’s market cap of £153m.

Risks include any shifts in public spending priorities away from infrastructure projects, which could reduce work available to Galliford Try.

Johnnie Walker owner

My final £1,000 would go into drinks maker Diageo.

I see these as UK shares to buy now because Diageo’s range of premium brands, including Johnnie Walker and Smirnoff, gives it pricing power. That could help keep profits buoyant. I’m also a fan of the company’s record of raising dividends each year across more than three decades.

But dividends are never guaranteed. As its acquisition of non-alcoholic drinks brand Seedlip suggests, Diageo risks falling profits due to the rising popularity of non-alcoholic beverages.

Well, I continue to have reservations about Tesla’s valuation, even at today’s lower share price. By contrast, there’s a UK growth stock that looks very buyable to me right now. I see a lot I like about it, and the EV story is part of the appeal.

Tesla share price slump

After hitting an all-time high of $900 in January, Tesla’s shares are currently around $580. The slump has wiped getting on for $300bn off the value of the company

Nevertheless, its market capitalisation of $560bn still dwarfs global giants like Toyota (market cap $225bn) and Volkswagen (market cap $165bn). With Tesla facing ever-increasing competition, its forward valuation of 130 times earnings makes no sense to me.

Polarised views on the Tesla share price

I think I’m in good company. One of the great analytical minds in the financial world, Michael Burry, announced back in December he was shorting Tesla. He described the valuation as “ridiculous”. The share price was about the same then as it is today, and Burry is still betting against the stock.

However, Tesla also has plenty of high-profile supporters, notably much-followed growth stock devotee Cathie Wood. With Wood having called Tesla right in the past, and the market having pushed the share price as high as that $900 as recently as January, I’m not tempted to follow Burry in betting against the stock. Equally though, it’s not a stock I’m interested in buying.

A UK growth stock

I’m much more interested in pioneering high-performance plastics specialist Victrex (LSE: VCT). This growth stock is in the UK’s mid-cap FTSE 250 index.

At £24 a share, Victrex’s market capitalisation of £2bn is a tiny fraction of Tesla’s. It’s valuation of 29 times earnings looks very attractive to me. In addition to possessing growth-stock characteristics, it’s highly cash-generative, debt-free and pays dividends. The prospective yield is a handy 2.3%.

Victrex serves a range of end markets across industrial and medical sectors. It has a long history of identifying areas of future demand and investing ahead of them. The EV market is one of a number of current targets. Indeed, management told us last month it’s “closing in on a new E-mobility business win”. In addition, it has “a growing number of development programmes”.

This growth stock also has risk

Many of Victrex’s industrial end-markets are cyclical, while its medical business unit has suffered due to a fall-off in elective surgery during the Covid-19 pandemic. As such, a reversal in the green shoots of post-pandemic recovery could hit the company’s earnings expectations.

Its earnings multiple is much lower than Tesla’s, but it’s still pretty punchy for a stock that’s expected to post high (but not hyper) growth. If it doesn’t deliver the expected growth, the shares could de-rate to a lower earnings multiple.

On balance, my personal risk-reward appetite leads me to see Victrex as a growth stock I’d buy, while remaining uneasy about Tesla’s valuation at its current share price.