Scottish Mortgage Investment Trust (LSE: SMT) shares are among the most popular and widely traded shares on the London market. Indeed, they usually feature among the top-five buys and sells by UK retail investors each week.
Alas, owners of Scottish Mortgage shares have taken a beating since the US tech bubble burst in late 2021.
Scottish, but no mortgages
Despite its name, Scottish Mortgage doesn’t invest in home loans. Instead, the investment trust — founded in 1909 — is the UK’s most popular global technology fund.
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The trust — managed by Edinburgh-based investment group Baillie Gifford — invests in high-growth and disruptive technology companies driven by innovation. Today, its total assets amount to almost £13.4bn, with major shareholdings including biotech business Moderna and Elon Musk’s carmaker Tesla.
More than half (54.2%) of the trust’s assets are in North America, with around a quarter (24.4%) invested in European companies. It invests in both private (52 holdings, 29.9% of assets) and public (47 holdings, 70.1% of assets) businesses.
The trust’s top-30 holdings amount to 75.8% of the total portfolio.
I’ve been a big bear on Scottish Mortgage shares
For at least 18 months, I’ve been 100% bearish (negative) on Scottish Mortgage stock. Indeed, as its shares peaked in November 2021, I repeatedly warned that they were one enormous bubble.
As a leading tech investor, Scottish Mortgage shares collapsed as the US tech bubble burst in late 2021. On 5 November 2021, this stock hit a record intra-day high of 1,568.5p.
As I write, the stock trades at 673.31p, down a whopping 57.1% from its peak. Here’s how it has performed over seven periods:
| One day | 0.0% |
| Five days | +2.2% |
| One month | -5.6% |
| Year to date | -6.5% |
| Six months | -13.9% |
| One year | -34.2% |
| Five years | +56.7% |
Though Scottish Mortgage stock has been a flop since late 2021, it is still up by more than half over five years. But this is entirely due to outstanding returns during the bull market of 2019/21.
Therefore, almost everyone who bought these shares since May 2020 would be sitting on a paper loss today. It’s also worth noting that this stock’s 52-week high was exactly a year ago, when the shares hit 1,058p on 31 March 2022.
That said, this FTSE 100 share has recently bounced back 5% from its 52-week low of 641.54p on Tuesday (28 March).
I’m mildly bullish now
After 18 months of being gloomy about Scottish Mortgage shares, I added them to my buy list this week. Indeed, if I had any spare cash, I’d buy a modest stake in this trust today.
Why my change of heart? Simply because the shares now trade at a discount of almost a fifth (-19.9%) to their net asset value (NAV) of 841.08p. For years, this trust’s shares traded at a wide premium to their underlying NAV, so this change triggers a value signal for me.
Also, the ongoing yearly management charge of 0.32% is modest versus other leading tech funds. However, the dividend yield of 0.5% a year is nothing special.
In summary, I’ve suggested to my wife that we should buy some Scottish Mortgage shares for our family portfolio. Also, with so many value stocks already in our pot, it would be nice to add a new growth/tech stock for balance and ballast!
