The Scottish Mortgage Investment Trust (LSE: SMT) share price has been swept up in the latest bout of stock market turbulence. Frankly, I wouldn’t expect anything else.
The trust is famously volatile. When it flies, it flies. But when it falls, it hurts. That’s why I’d rather buy its shares during the bad times than the good ones. Today qualifies as a bad time and therefore a good one, if you see what I mean.
No way was the trust going to dodge the fallout from Donald Trump’s tariff threats. Not with roughly two-thirds of its portfolio invested in US growth stocks, particularly tech.
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Can this FTSE 100 trust deliver again?
Tariffs could hit sales and profits hard, while the threat of a US recession adds to the pressure. The shares are down 18% over the past three months, derailing what had been a promising rally. Over 12 months, the gain has been trimmed to just 5%.
It could have been a lot worse. Scottish Mortgage shares halved during the tech rout in 2022, and I was among those wondering if it was time to throw in the towel.
I ended up buying just before the rebound, but I’ve no illusions. This trust is a bumpy ride, and always will be.
Scottish Mortgage aims to identify the world’s most transformational companies and take a position at an early stage. Lately, AI fever helped supercharge valuations. Now Trump’s threats have thrown a spanner in the works.
James Anderson built the trust into a juggernaut, and since his departure, lead manager Tom Slater has quietly been making his mark. Last November, he trimmed its stake in Nvidia, warning that soaring AI training costs could squeeze adoption. That decision looks even smarter now, especially with rival DeepSeek entering the scene.
SpaceX, an unquoted holding making up a chunky 7.3% of the portfolio, is the most eye-catching asset in the trust. It’s a brilliant opportunity. But also risky, as the world blows hot and cold on Elon Musk. More than a quarter of the portfolio is in unquoted companies, which adds uncertainty and volatility.
High risk, high potential
Anyone considering jumping in now should first examine their current portfolio. Those already heavily exposed to US tech should avoid accidentally doubling down. But for others, this could just be a buying opportunity.
Scottish Mortgage is currently trading at an 8.5% discount to net asset value, with the shares sitting around 865p. That price might turn out to be a steal, if the storm passes.
The trust tends to outperform on the way up and underperform on the way down. If tensions escalate, the shares could take a bigger beating. Any investor considering the stock must accept that it’s a possibility.
I’m happy with my stake and plan to hold. For those not yet in, I think it’s worth considering after the recent dip, but only with a minimum 10-year view.
