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Scottish Mortgage Investment Fund (LSE: SMT) are among the most popular and traded stocks on the London market. In fact, they typically feature in the top five buys and sells for UK retail investors each week.
Unfortunately, Scottish Mortgage shareholders have taken a beating since the US tech bubble burst in late 2021.
Scottish, but no mortgages
Despite its name, Scottish Mortgage does not invest in mortgage loans. By contrast, the investment fund, founded in 1909, is the UK’s most popular global technology fund.
The trust, managed by Edinburgh-based investment group Baillie Gifford, invests in innovation-driven, high-growth and disruptive technology companies. Today, its total assets stand at nearly £13.4bn, with significant holdings including biotech businesses. Modern and Elon Musk’s car manufacturer tesla.
More than half (54.2%) of the trust’s assets are in North America, with around a quarter (24.4%) invested in European companies. It invests in both private (52 shares, 29.9% of assets) and public (47 shares, 70.1% of assets) companies.
The top 30 holdings of the trust amount to 75.8% of the total portfolio.
I’ve been a big bear in Scottish mortgage shares
For at least 18 months I have been 100% bearish (negative) on Scottish Mortgage shares. In fact, when their shares peaked in November 2021, I repeatedly warned that they were a massive bubble.
As a leading technology investor, Scottish Mortgage shares collapsed when the US tech bubble burst in late 2021. On November 5, 2021, this stock hit a record intraday high of 1,568.5 pence.
As I write, the stock is trading at 673.31 pence, down 57.1% from its high. Here’s how he’s performed over seven terms:
| One day | 0.0% |
| Five days | +2.2% |
| One month | -5.6% |
| year to date | -6.5% |
| Six months | -13.9% |
| One year | -34.2% |
| Five years | +56.7% |
Although Scottish Mortgage shares have been a flop since late 2021, they are still up by more than half in five years. But this is entirely due to the outstanding returns during the 2019/21 bull market.
Therefore, almost everyone who bought these shares since May 2020 would be sitting at a paper loss today. It’s also worth noting that the 52-week high for this stock was exactly one year ago, when the stock hit 1,058 pence on March 31, 2022.
That being said, this FTSE 100 the stock recently rallied 5% from its 52-week low of 641.54p on Tuesday (March 28).
I’m slightly optimistic now
After 18 months of being pessimistic about Scottish Mortgage shares, I added them to my shopping list this week. In fact, if I had some extra money, I would buy a modest interest in this trust today.
Why my change of heart? Simply because the shares are now trading at a discount of almost a fifth (-19.9%) to their Net Asset Value (NAV) of 841.08 pence. For years, shares in this trust have traded at a large premium to their underlying NAV, so this change provides a value signal to me.
Additionally, the ongoing annual management fee of 0.32% is modest compared to other leading technology funds. However, the dividend yield of 0.5% per year is nothing special.
In short, I suggested to my wife that we should buy some Scottish Mortgage shares for our family portfolio. Also, with so many value stocks in our pot, it would be nice to add a new growth/tech stock for balance and drag!
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