It has been an unrewarding year for shareholders in Scottish Mortgage Investment Trust (LSE: SMT). The shares are down 19%. They have fallen by twice that much since November. But over the past few weeks, the Scottish Mortgage share price has started to move upwards again.
Is it worth adding it to my portfolio now, or have I missed my chance?
Market timing
If a share offers me good enough value, the exact price at which I buy it will not matter too much in the long term. Of course the cheaper I buy it, the bigger a profit I could make. But market timing is very difficult to do accurately, if not impossible. Instead of spending lots of time on that, I would rather use it to identify companies with attractive long-term prospects.
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Although the Scottish Mortgage share price has been moving up over the past few weeks, it remains far below its highs. What will happen next?
Large portfolio of companies
Scottish Mortgage is an investment trust, meaning it pools investors’ money to buy shares in other companies. That helps explain why it has fallen. Some of its large tech positions have been hurt by a broad retreat in tech shares over the past few months.
But it also makes it hard to know what might happen next. Unlike a business with its own performance outlook, Scottish Mortgage will likely move up or down based on the performance of companies whose shares it owns.
As well as tech shares, the company has invested heavily in biotech companies including Moderna and Illumina. The strategy is basically to focus on areas of high growth potential. Scottish Mortgage often has shares in multiple companies in one such growth area, rather than trying very hard to pick one winner far in advance.
Can the Scottish Mortgage share price recover?
I think that makes a lot of sense as a long-term investment strategy. If Scottish Mortgage stays the course with its investments, hopefully some of them at least will do very well in future. That is the approach it has taken before, owning shares such as Tesla before they caught the attention of many investors.
If that works and the shares the trust holds increase in value, it should help the Scottish Mortgage share price too. Over time, it may even reach its old levels again. But that is not guaranteed to happen – and even if it does, it may take a while. Meanwhile, broader stock market movements could drive the trust share price downwards.
As a long-term investor myself, though, I think the Scottish Mortgage share price is looking more attractive as a potential addition to my portfolio. I like its exposure to a wide range of growth stocks. Although the share price has crept up in recent weeks, it could still offer me good value depending on how the growth shares it owns perform in coming years. At its current price, I would consider adding it to my portfolio.
