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I've been looking for cheap shares that I can add to my ISA. One that I like the way it looks now is Scottish Mortgage Investment Trust (LSE: SMT).
If I had extra money to invest in my ISA right now, I would happily load it up.
Is it really cheap?
Every business day, the investment trust publishes its net asset value. It has been trading at a considerable discount to its net asset value lately.
In fact, the fund explicitly justified its recently announced share buyback plan of at least £1 billion on the basis that it would like to close the gap between its share price and net asset value.
However, in reality the assessment is a subjective matter.
Scottish Mortgage owns publicly traded shares as tesla and Nvidia, whose market price can be easily determined. However, market price and value are not necessarily the same.
It also has stakes in a variety of unlisted companies, such as SpaceX. There, assessment is to some extent a matter of judgment.
Why do I think it looks cheap?
But while I think the current 9% discount of Scottish Mortgage's share price to net asset value makes it cheap, what really excites me here is the long-term potential of the trust's investment in companies it believes have strong growth prospects.
We know from the trust's track record in picking stocks like Tesla and NVIDIA that it has been well ahead of the curve before when it comes to identifying compelling growth stories.
Last year alone, Scottish Mortgage's share price soared 30%. In five years, the price increase has been an impressive 70%.
But in the stock market, past performance is not necessarily an indicator of what will happen in the future. So is this still a potentially cheap stock considering what could come next?
For one, the rapid rise in the price of shares held by the trust, such as NVIDIA, means that if they now give up some of those profits, Scottish Mortgage's share price could also be affected.
On the other hand, Scottish Mortgage offers me exposure to dozens of different companies in areas of the global economy that their trustees believe are destined for growth.
If they're right, it could still be the kind of cheap stock I'd like to get.
Why would you buy?
This involves a certain element of judgment, although the same applies to some extent to any investment.
Scottish Mortgage publishes its holdings regularly for all to see. I think its selection of listed and unlisted companies offers good exposure to a geographically diverse range of companies primarily focused on growth opportunities such as the digital economy.
Not everyone will be successful. But if some are doing quite well, Scottish Mortgage's current price makes it look like a cheap stock to me.
If I had extra money to invest, I would happily buy it for my portfolio right now.
