Like many UK-listed stocks, Scottish Mortgage Investment Trust (LSE: SMT) shares have had an awesome start to the year. During 2024, its share price has shot up 11% as investors begin to regain confidence in the market after an incredibly dire couple of years.
That now means the Baillie Gifford flagship fund is up 27.1% in the last 12 months. And while that’s all well and good, I’m curious about one thing.
Does this mean that investors, like me, considering buying some shares today have missed the boat? I want to take a closer look at it there’s any value left to extract out of Scottish Mortgage.
Any value left?
When it comes to valuing shares, there are a host of methods that investors can use. The price-to-earnings ratio is one of the most common. However, for funds, looking at whether it’s trading at a premium or discount its net asset value (NAV) is highly effective.
Scottish Mortgage is currently trading at a 7.9% discount to its NAV. That looks cheap and means in theory I can buy the companies the trust holds for lower than their market rate.
Painting the full picture
However, that doesn’t paint the full picture. That’s because, of its 99 holdings, over 25% are private companies not listed on an exchange. Valuing these businesses can often be challenging. Should they go public, their share price could fall.
That feeds more widely into one of the risks with investing in the trust. Its focus is on owning growth stocks and with that comes the potential for large amounts of volatility.
Furthermore, growth stocks struggle in high interest rate environments given they often have large amounts of debt. Therefore, any signs of a delay in rate cuts could send the share price tumbling.
A strong track record
Of course, on the flip side, there’s also the possibility that unlisted companies could soar should they list. And there’s certainly the potential for that to happen with exciting companies such as Elon Musk’s SpaceX, which the trust holds.
That’s why I’m a fan of Scottish Mortgage. By owning it, I gain access to investment opportunities I couldn’t otherwise have as a retail investor.
Coupled with this, management has an impressive track record of finding unearthed growth stocks before the rest of the market does. It invested in Tesla in 2013. Back then, investors could pick up a share in the now industry-leading company for just $6 a pop. More recently, Scottish Mortgage snapped up shares in chipmaker Nvidia before the wider market piled into the stock.
Past performance is by no means an indication of future returns. But Scottish Mortgage says it sets out to own “the world’s most exceptional public and private growth companies” to generate long-term returns. It has proved over the last decade that it’s more than capable of doing that.
Still growing room
Considering that, I reckon there’s still value in Scottish Mortgage shares. While the trust’s growth in recent months has been impressive, it’s still down 42.8% from its all-time high, which it reached in November 2021.
I’ve had it on my buy list for a long time now. I’ll have some spare cash this month. I’ll be adding it to my portfolio.
