The case of Scottish Mortgage Investment Trust’s (LSE: SMT) an intriguing one. After becoming incredibly popular during the pandemic, its shares have fallen out of favour with investors.
After reaching a £15.28 all-time high back in November 2021, since then the stock’s lost 42.2% of its value. That said, the trust’s still up 71.9% in the last five years.
Back then, investors would have paid £5.14 for a share. Today, it would cost £8.83.
But as investors, it’s important that we don’t dwell on the past. Yes, it can sometimes help us make more informed decisions. However, it’s where a stock has the potential to go in the years to come that I think’s more important.
With that, what does the remainder of 2024 have in store for Scottish Mortgage shares?
My prediction
The trust’s been gaining momentum in recent months, rising 12.1% in 2024, and I think it’ll continue trending upwards for the remainder of the year.
Over the last five years, it has averaged an annual gain of 14.4%. If it were to rise that much this year, that would leave its share price at £9.01, a small increase from its current price.
In the last 10 years, it has risen 364.9%, an average of around 36.5% a year. If it were to do that in 2024, that would leave its share price at £10.76.
I reckon a 36.5% gain may be a touch out of reach. That said, I think we could see Scottish Mortgage flirt with and even surpass the £10 mark this year.
What will get it there?
But what could help drive the stock to that price? Well, interest rates are one factor.
The Bank of England cutting rates, which many experts expect to occur in the summer, could see the Scottish Mortgage share price soar. That’s because it owns growth stocks, which tend to prosper in lower rate environments.
These sorts of companies use debt to fuel growth, which becomes more expensive to pay off when rates are higher. Not only do lower rates make debt cheaper, they also allow for more spending on things such as R&D for these companies.
A bargain
To go alongside that, the trust’s currently trading at a 7.5% discount to its net asset value. That means I can buy the high-quality businesses it owns, such as Amazon and Nvidia, cheaper than their market rate.
That said, I must note that over 25% of its holdings are private companies. Valuations for these businesses can be difficult to pinpoint, so there’s that to consider.
Not an easy ride
With Scottish Mortgage, I’d expect periods of volatility. While rate cuts seem imminent, all talk surrounding them at the moment is speculation. It’s likely we’ll get cuts this year. But any sign of a setback could harm the trust’s price. On top of that, investing in growth stocks can be a risky endeavour.
Playing the long game
But even with volatility, I’d still happily buy Scottish Mortgage shares today if I had the cash. Management has proven its ability to deliver handsome returns over the long run, which is the most important thing. Looking like great value, I’m hoping to buy some shares in May with any investable cash.
