The Scottish Mortgage (LSE: SMT) share price has taken a beating over the past year, down 33%. With inflationary pressures causing a weak economic outlook, investor confidence in stocks such as Scottish Mortgage has waned in 2022.
The investment trust has been a top performer over the past decade. And despite a 52-week low of 670p, the Scottish Mortgage share price is currently sitting at around 900p. Here’s why I think the stock could be a great long-term addition to my portfolio today.
Scottish Mortgage decline
As mentioned, this year has been nothing to write home about for Scottish Mortgage. With inflation spiking globally, including 10.1% and 8.5% for the UK and the US respectively, the trust has been in the firing line of this.
With a focus on growth stocks, some of its top holdings have seen large losses as investors have shied away from such businesses.
Its tech-heavy focus has also fuelled this downfall as the sector has seen a market correction this year. Combined, this has driven down the stock’s price.
Not all bad news
Despite this, it’s not all bad news for Scottish Mortgage.
For a start, the last month has seen the stock rise 13%, clawing back some of its recent losses. This could be a sign that investors are beginning to gain confidence in the trust once again.
Yet more importantly, what’s crucial for me is Scottish Mortgage’s long-term outlook. Sure, it’s had a tough year. However, management highlights that performance is judged over a five-year stretch. And therefore, short-term volatility is less of an issue to me. While past performance is no indication of future returns, the last five years have seen Scottish Mortgage shares rising 114%. Pretty impressive.
As a retail investor, I also deem the range it offers my portfolio to be vital. With one investment, I get a slice of stocks from a variety of sectors and countries.
What this essentially does is help offset risk. By owning a slither of each stock through the trust I’m avoiding the riskier play of buying its holdings, such as ASML, directly.
One issue I do have is its relatively large weighting in China. The nation recently reduced its medium-term lending rate by 10 basis points as data revealed a slowdown in consumer demand. With cracks starting to appear in its economy, this could spell bad news for Scottish Mortgage.
However, I still have faith in the Chinese economy’s potential to produce the ‘next big thing’. Scottish Mortgage has an eagle eye when it comes to finding high-growth companies that produce juicy returns.
I’m still buying
So, despite the near-term issues it may face, I’d still buy the shares today. I think from a long-term perspective its weighting in China has the ability to bear fruit. Add this to the diversity it offers my portfolio, and I’d happily open a position in the stock.
Trading at around the 900p mark, I’d buy Scottish Mortgage shares today and hold for the long run.
