During most of the difficult pandemic period in 2020 and 2021, Scottish Mortgage Investment Trust (LSE:SMT) outperformed. Over the past three years, Scottish Mortgage shares are up 63%. Even though the past year has seen a 38% correction lower, I think that the business could be a smart pick for some of my cash if we see another period of market uncertainty. Here’s why.
History doesn’t repeat itself, but it rhymes
In 2020, the Scottish Mortgage price gained over 100%. Even though the pandemic raged on and lockdowns fundamentally changed our lives, the trust managed to produce some impressive gains. A large part of this was down to manager skill in picking stocks to hold within the portfolio. For example, it held big positions in the likes of Amazon and Tesla during this period.
The ability for the managers to look globally when picking stocks gives them a great deal of freedom. This can be good and bad though. In fact, most of the losses from this year have come from exposure to the Nasdaq, with tech growth stocks performing badly so far in 2022.
The main point here is that if we see another crash in the UK due to our inflation and energy problems, the trust could perform well. The unconstrained nature of the team means that it can allocate money away from the UK to areas around the world (including Asia) that could be doing better. I’m not saying that it would replicate 2020, but it could beat the FTSE 100.
Tapping into experience
Even though I spend a lot of time reading about stocks, I still work to make a living during the week. With a difficult winter ahead for most of us, it’s likely that I’ll have other distractions that will take my focus away from the stock market.
I can’t be glued to my computer screen watching price movements all day, but the fund managers at the trust can. That’s their job. The key manager of the fund is Tom Slater, who joined the firm back in 2000. His depth of experience leads me to conclude that my money would be in good hands.
When talking about navigating stormy markets, having some of my money in the trust makes sense to me. I’m not going to claim that the share price could rocket higher in coming months. But in terms of allocating my money to a stock that could help me during a crash, I think it’s a good option.
Scottish Mortgage shares for the long run
The performance so far this year has been disappointing. There’s the risk that if it keeps a large exposure to US growth stocks that this could continue. Yet even if I’m completely wrong about the advantages of the trust in the short term, this still isn’t a complete disaster.
In years to come, I don’t think the future is bleak for top current holdings including Moderna, NIO and Alibaba. As an investor with a time horizon stretching years into the future, I can afford to look past potential short-term issues. As a result, I’m thinking of buying Scottish Mortgage shares now.
