Judges Scientific (LSE:JDG) was one of my top UK shares for 2026. But it’s down 26% this year – so what’s happened?
Did I get this one wrong? Or is my investment thesis still intact and it’s just a question of being patient with this one?
What’s going wrong?
Demand for scientific instruments was weak last year, especially in the US. But I expected this to eventually show signs of recovery.
Congressional appropriators blocked the Trump administration’s proposed funding cuts. In its March update, however, Judges Scientific was cautious around this:
The uncertainty emanating from the USA is disruptive to our business and the reduction in federal funding of scientific research remains a source of great unpredictability in spite of recent congressional moves to restore it.
That’s not a great sign. But there’s also something else to pay attention to. The 2026 outlook for the firm’s Geotek subsidiary is also uninspiring.
Geotek conducts coring expeditions with earth scientists. These are extremely profitable, but they’re also very infrequent.
Judges Scientific isn’t expecting another expedition in 2026. But does that mean my thesis for the stock is busted?
Thesis busted?
I’m well down on my investment in Judges Scientific. But I actually think there were some real positives in the firm’s update.
One is that it looks like it’s a question of when – not if – research funding will flow again. And I’m not in a rush with this one.
Another is that there was some good news about Geotek. Since 2022, the business has managed two expeditions. The next expedition is expected to come in early 2027. And the frequency after that is anticipated to be roughly three every four years.
That won’t make a difference in 2026. But it could be a huge boost to revenues and profits over the long term.
Given this, I’m still pretty optimistic about the stock. There is, however, something that I’m more aware of now than I was before.
Cyclicality
Most businesses go through ups and downs. But it’s worth noting that Judges Scientific is more prone to this than others.
That’s not an accident. It comes from the fact that the company’s equipment is extremely expensive and highly technical.
This isn’t necessarily a bad thing. It creates high barriers to entry and makes the firm difficult to compete with.
It does, however, increase cyclicality. Uncertain environments have a bigger effect on new purchases than replacement parts.
That’s why it’s so important to think long-term with this type of business. But from that perspective, I think things still look good.
What I’m doing
Judges Scientific shares are much cheaper than they were when I started buying them. But I don’t think the business is fundamentally worse.
Given this, why would I think about selling? If anything, the equation looks more favourable to me from a buying perspective.
For what it’s worth, the analysts are also on my side with this one. The average price target is 52.48% above the stock’s current level.
Source: TradingView
That’s about in line with my own estimate of what the stock is worth and it implies a 34% discount to fair value.
Given this, I’m looking to add to my investment. I’m mindful of concentration risk, but I can add a bit while staying diversified overall.
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Stephen Wright owns shares in Judges Scientific.
