Scottish Mortgage Investment Trust (LSE:SMT) is a publicly traded investment trust that invests globally. The FTSE 100 firm has seen a drop off in price recently so is now a buying opportunity?
FTSE 100 opportunity?
SMT looks for strong businesses with above-average returns. It has no constraints as to geography, industry, or sector. It had an excellent 2020 and I believe it has the potential to have a similar 2021, if not better.
The past five years, Scottish Mortgage Investment Trust shares have returned over 350%. It’s share price increased by over 110% in 2020 alone. Considering we have been in a global pandemic and a financial slump in the markets, that’s not bad in my opinion. It is currently trading at close to 1,116p per share as I write.
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The past month or so has been a slightly different story. Investors have begun to sell shares due to valuation concerns. These valuations are linked to the US tech sector where Scottish Mortgage Investment Trust owns a number of stocks such as Amazon, Netflix, and Alibaba to name a few. Between February and 15 March, SMT lost close to 20% in share price value.
Why I like Scottish Mortgage Investment Trust
SMT is run by experienced investment duo James Anderson and Tom Slater. The duo have been with Baillie Gifford, the Edinburgh-based asset manager behind the trust, for a significant amount of time. In simple terms, as a savvy investor, I would be paying for the wealth of experience these two possess.
Scottish Mortgage Investment Trust has performed well consistently over a sustained period of time and I believe it is a testament to the experienced team behind it. We all know that past performance doesn’t guarantee future performance. But I do think it shows flexibility and adaptability in differing conditions, which puts me at ease as an investor.
SMT owns a number of tech stocks within its portfolio. I am a fan of tech stocks. FTSE technology stocks have become defensive options in the past year or so. The Covid-19 pandemic has changed the role technology plays in our day to day lives at a faster rate than many could have predicted. Almost 10% of Scottish Mortgage Investment Trust’s portfolio is made up of Tesla, which is another stock I like.
High risk or big reward?
Scottish Mortgage Investment Trust shares do possess risks. Its share price has experienced some volatility. Only six weeks ago it was flying high, but I believe market conditions are still fraught and changes could be afoot when conditions do normalise. It could be argued the recent decline is a sign of market conditions normalising. Furthermore, Scottish Mortgage Investment Trust holds substantial shares in stocks that are considered to be in a ‘bubble.’ This means activity and performance can curve upwards in the short-term but slow down and stagnate in the long term, so there is a risk of that too.
SMT performed brilliantly in 2020 and I believe it will continue that trend in 2021 and beyond. It is on my best stocks to buy now list, as is this FTSE stock. I believe investing in Scottish Mortgage Investment Trust could protect my money as it spreads across a diverse range of stocks. I would currently rate it as a buying opportunity.
