The Scottish Mortgage (LSE: SMT) share price has slumped in value over the past week. Shares in the investment trust have dropped around 10% since February 18.
After the stock’s recent performance, this sudden decline might have surprised some investors. Before the slump, the stock was up around 15% for the year. However, it’s now trading at around the same level it started the year.
Still, over a longer period, shares in the investment trust are still beating the market. The value of the trust has risen by more than 100%, excluding dividends over the past 12 months. It has outperformed the FTSE 100 by around 107%, excluding dividends.
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Taking a step back looks as if the trust’s performance this week is just a blip. But does that mean I should take advantage of the recent decline in the value of the Scottish Mortgage share price to buy into this growth story?
Scottish Mortgage share price outlook
Past performance should never be used as a guide to future potential. As such, just because the trust has been a top investment to own over the past 12 months does not necessarily mean that it will continue to do so.
Indeed, as an investment trust, the performance of the stock is tied to that of its underlying holdings, which in this case are high-flying tech companies like Tesla, Amazon and Chinese tech group Alibaba.
All of these companies have prospered in the pandemic. As a result, the value of their shares has surged. Unfortunately, in recent days investors have started to question whether these stocks can continue to meet market expectations.
That has resulted in significant declines in market value for some of these businesses. This has had a knock-on effect on the Scottish Mortgage share price.
The risk that the value of the underlying investments in a fund will decline is always something fund investors will have to deal with. However, where Scottish Mortgage differentiates itself is that the company has a strong track record of selling assets and recycling profits into new opportunities. It recently cut its largest holding in Tesla, for example, to unlock cash.
Buy low, sell high
Thanks to this strategy of buying low and selling high, the trust has produced a return of nearly 900% over the past 10 years. There’s no guarantee this performance will continue as we advance. There’s also no guarantee the trust’s strategy will continue to work. These are risks investors have to consider.
Nevertheless, as a way to invest in some of the world’s fastest-growing tech companies, I think the Scottish Mortgage share price is one of the best opportunities available to me today.
The managers of the trust seek to invest in companies with a long-term outlook. This has served them particularly well over the past decade, and it also fits in with my personal investment strategy.
As such, I would buy the investment trust for my portfolio to gain exposure to the fast-growing tech industry.
