Scottish Mortgage Investment Trust (LSE: SMT) shares have been on some journey in the last five years. During that time, the stock’s up 59.4%. While that may look impressive on the surface, it doesn’t paint the full picture.
As I write on 14 March, a share in the Baillie Gifford-managed fund costs £7.92. That’s way off its all-time high of over £15, which it hit back in 2021.
That makes me think now could be a good time to consider buying. But what might 2024 hold for the stock?
High rates are an issue
The trust has been volatile in recent times, and I’ve got a feeling that this will continue to be the case for the year ahead. There are a few reasons for that, one of the biggest being interest rates.
Scottish Mortgage “aims to identify, own and support the world’s most exceptional growth companies”. The issue with that is these sorts of businesses don’t fare well in high interest rate environments.
They tend to have high levels of debt to drive growth. The problem is, with the UK base rate at 5.25%, this debt becomes more difficult to pay off.
Investors shy away from growth stocks during these times. That doesn’t bode well for the trust.
Long-term outlook
But I’m fine with enduring some volatility if I see long-term potential. With Scottish Mortgage, I think I do.
Right now, I think the trust looks like a bargain. It’s trading at a 15% discount to its net asset value. What that essentially means is that every 85p I invest in the trust is technically worth £1. In my opinion, that’s a bargain too good to turn down.
One simple reason I also like Scottish Mortgage is because of the diversification I get from owning it. I want to make investing as easy as possible. When buying Scottish Mortgage shares, I’m essentially buying a small slither of the 99 companies that it owns.
A revolution
Of those 99 businesses, many are related to the artificial intelligence (AI) industry, which is another factor that makes me bullish on its long-term performance.
It has holdings in some of the largest players in the space, including Nvidia, Amazon, and ASML. In the last year, their share prices have rocketed. The AI revolution looks like it’s well under way and some think this is only the start.
As such, I’d expect that the trust’s share price would also have gone on a tear. But that’s not the case. Instead, it has risen a mere 0.4% in 2024.
A steal?
With that in mind, I think at its current price, Scottish Mortgage is a steal. When I have some investable cash, I plan to open a position.
I think we could see further struggles this year for the stock. But I invest for the long run. I think now could be a smart entry point.
In the years to come, I’m hoping Scottish Mortgage will be able to reach the heights it was at a few years back.
