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Scottish Mortgage Investment Trust (LSE: SMT) shares have been highly volatile over the last five years, but have still grown almost 50% in that time.
Like almost every FTSE 100 stock, the investment trust has been caught in the crossfire of Donald Trump’s trade tariffs, which have hit the Magnificent Seven US tech mega-caps hard. Scottish Mortgage has bags of exposure to US tech, with Amazon and Meta Platforms its third and fourth-biggest holdings, respectively, but so far it’s held up pretty well.
Over the past month, the shares have jumped 10.5%, outpacing the S&P 500‘s 12% rise. They’re up a modest 5.7% over one year.
It’s a mistake to see this fund as a substitute for an S&P 500 tracker. While the US accounts for more than half the portfolio, the trust also has plenty of exposure to Asia and Europe. So it has to be judged on its own merits.
Bold bets and timely trims
Scottish Mortgage is no stranger to bold bets. It holds 51 private companies, representing 27.6% of total assets.
This is also a highly concentrated portfolio, with the top 30 holdings representing more than 80% of total assets. One notable position is SpaceX, the largest single holding at 7.8% of total assets. I see it as one of the best ways for UK investors to think about getting exposure to this unlisted venture.
In February, managers Tom Slater and Lawrence Burns significantly reduced Scottish Mortgage’s holding in another Musk enterprise, electric vehicle maker Tesla, which now accounts for less than 1% of the £13.6bn trust.
Slater said the decision was driven by Tesla’s “very strong appreciation”, with the company’s value increasing by half a trillion dollars “without really any fundamental news”. Given subsequent events, this looks like a possibly good call.
This trimming of winners started with Nvidia in November, with Slater and Burns highlighting valuation concerns. While Nvidia remains a “decent size holding”, this now looks like another sound move. It suggests they have a pretty smart handle on tech stocks, making the trust tempting for those who don’t want the risk of buying the Magnificent Seven individually.
Slater remains bullish on SpaceX, as he expects the US will deregulate the space industry. Plus there’s the carrot of a potential IPO, which would be nice.
Discounted entry point
Scottish Mortgage currently trades at a discount of 10.4% to its net asset value. While that looks appealing, I’m always wary of using investment trust premiums and discounts as a gauge. There’s never any guarantee the discount will close. They can always widen.
Today doesn’t offer a brilliant buying opportunity simply because the shares haven’t really been hit that hard by the recent sell-off. In fact, I’m a little surprised by their resilience. Of course, the stock market has recovered strongly, since Trump announced his 90-day tariff pulls on 9 April.
I think today is as good a time to consider buying this FTSE 100 growth trust as any. But only for investors who take a long-term view.
The only reason I won’t buy myself is that I already have a big stake in Scottish Mortgate. I plan to leave my money invested for years and hopefully decades. So far, I haven’t regretted my decision.
