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Scottish Mortgage Investment Trust (LSE:SMT) has been a member of the FTSE 100 index since 2017. In this time, its share price has increased by around 220%, including a 19.5% rise this year.
The investment trust aims to find the world’s greatest growth companies and own them for a long time. As such, its average holding period for each stock is around a decade, which is ample time to let big winners play out.
The proof can be see by the fact that in the 10-year period to the end of June, the portfolio contained three 10-baggers (Amazon, Ferrari, and Netflix), a 20-bagger (Tesla), and a 100-bagger (Nvidia).
To put that last one in context, somebody would now have well over £500k from a £5k investment made in Nvidia a decade ago. As the late, great Charlie Munger pointed out: “The big money is not in the buying and the selling, but in the waiting.”
However, it’s worth remembering that this hypothetical Nvidia investor would have endured multiple gut-wrenching 40%+ drops along the way.
What’s this megatrend then?
Last month, Scottish Mortgage’s lead manager Tom Slater spoke on The Motley Fool Money podcast. In this episode, he explained the trust’s investment philosophy, which has a lot in common with Foolish investing (long-term thinking, active stock-picking, a focus on underlying businesses, acceptance of volatility, etc).
At the end, Slater was asked which stocks he’s excited about over the next 20 years. Somewhat surprisingly, he didn’t mention artificial intelligence, robotics, or some other whizzy tech. Instead, he highlighted e-commerce.
Now, online shopping isn’t exactly new. It’s been around for 25 years, and there are an estimated 2.77bn global e-shoppers today, according to Statista. Total e-commerce sales are expected to top $6.8trn this year.
However, 2.77bn only represents around a third of the world’s population. And less than 23% of retail purchases are forecast to take place online by 2027. This suggests that global e-commerce still has a massive runway of growth ahead.
Moreover, armed with mountains of consumer data, large e-commerce platforms in developing markets are launching financial services.
Slater points out that these fintech trends have so much further to run in underbanked regions like Latin America and Southeast Asia. As such, he thinks these types of opportunities are “completely undervalued” today relative to the next 20 years.
Below are four profitable e-commerce firms that he highlights. Each stock might be worth researching further, including risks.
| Company | Core operating regions | Forward P/E ratio |
|---|---|---|
| MercadoLibre | Latin America | 32 |
| Sea Limited | Southeast Asia (Indonesia, Singapore, Malaysia, etc) | 43 |
| Coupang | South Korea | 78 |
| PDD Holdings | China (Pinduoduo) and global (Temu) | 12 |
Scottish Mortgage shares
Looking at my portfolio, I feel really good about my exposure to this area. I have large holdings in MercadoLibre and Shopify, the e-commerce software giant. I’ve just started a position in Sea Limited too.
I also own shares of Scottish Mortgage, which itself has meaty positions in Amazon and Meta (more online shopping is being done on Instagram nowadays). It also holds ByteDance, the owner of TikTok (outside the US). TikTok Shop is growing rapidly worldwide.
Finally, the trust has a large stake in Stripe, the online payments firm that now processes the equivalent of 1.3% of global GDP.
One thing to remember is that Scottish Mortgage can underperform badly when US tech shares sell off. This is a key risk.
But for long-term investors who are bullish on e-commerce and fintech, I think Scottish Mortgage stock is worth considering at £11.40.
