I’m very bullish on Scottish Mortgage Investment Trust (LSE: SMT) shares. I think investors should consider the stock today.
That’s what I’d be doing if I had the cash. The trust’s share price has fallen 43.5% from its October 2021 all-time high of £15.29. I reckon now is possibly a great opportunity.
Investing made easier
The trust has 99 companies in its portfolio, including heavyweights such as ASML, Nvidia, Amazon, and Moderna. I like the diversification that offers.
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I think for retail investors this is important. It means they can get exposure to a host of companies and sectors just by buying one stock. I’m keen to make my own investing as easy as possible. That’s certainly one way to do it.
I like the idea of owning some of the finest companies out there. What’s even better is the chance to snag them for cheaper than their market rate. With Scottish Mortgage trading at a 10.4% discount to its net asset value (NAV), that’s exactly what investors can do by buying its shares.
This means that every 89.5p invested in the trust is in theory worth £1. Now, I’m not the smartest cookie. Even so, I think that’s a good deal.
On the negative side, 26.2% of its portfolio consists of privately held companies. Valuations for such businesses are hard to arrive at and there are a lot of unknowns surrounding them.
Vast opportunities
But I also think that’s exciting. It means Scottish Mortgage has the potential to own the next big thing. Take SpaceX for example, which makes up 4% of its portfolio.
Some (but not all) value the company as high as $180bn. Last year it posted $9bn in revenue. This year it’s expected to rise by two-thirds to $15bn.
That’s an opportunity I can’t access on my own as a retail investor. And it feeds more widely into the trust’s goal “to identify, own and support the world’s most exceptional growth companies”. It’s already done this with Tesla, which it first invested in back in 2013.
Rising sentiment
After what’s been a sluggish few years, sentiment around the trust is slowly starting to pick up. In the last six months, it’s up 27.4%. Scottish Mortgage shares seem to be finding their momentum again.
I expect this to continue. The unfavourable macroeconomic environment that has hindered its performance should ease when interest rates are eventually cut. Higher rates see investors turn their back on riskier growth stocks. However, as the Bank of England slowly brings rates back down, this could provide the stock with a boost.
That said, rate cut talk at the moment is speculation. It’s incredibly likely we’ll see some this year. Yet when this will occur is unknown.
Nevertheless, its recent £1bn share buyback scheme, which management aims to complete over the next two years and is the largest ever investment trust buyback programme in absolute terms, may help rally sentiment for the time being. The scheme could also help close the gap between the stock’s price and the fund’s NAV.
All things considered, at 863.7p, now could be a smart time to consider snapping up some shares. I think the Scottish Mortgage share price has plenty of growing room.
