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Investors have remained incredibly loyal to Scottish Mortgage Investment Trust (LSE: SMT), despite some difficult years.
Without a doubt, many remember their happy days, when the FTSE 100Listed technology-focused trusts have returned more than 500% in five years and are clinging to hope of a repeat.
Scottish Mortgage's share price plunged more than 50% in 2022. It was a terrible year for technology, but confidence fell much more than that of the big tech companies. Nasdaq index, which closed the year with a drop of “only” 28.39%.
Is it all it seems?
I took advantage of the crisis to buy shares in Scottish Mortgage in May and August last year. So far, I'm up 21.83%. In 12 months, shares are up 25.83%. That's respectable, but thinking about it, it's not great.
Scottish Mortgage typically has between 50 and 100 investments, many of them private companies. The advantage of targeting the volatile disruptive technology sector through a trust is that it spreads the risk. The downside is that investors will never enjoy the pure joy of having a big winner like NVIDIA.
The chipmaker is the trust's largest holding at 6.79% of the portfolio, up almost 200% in 12 months. Scottish mortgage investors have exposure but don't really share in the fun. They have also been exposed to the misery of holding the unlisted and now ailing Swedish battery maker Northvolt in their portfolio.
That's why I only buy individual UK shares these days, never funds. I prefer to make my own winning and losing bets.
I buy funds that cover foreign markets, but mainly trackers. I've just realized that Scottish Mortgage is now the only actively managed fund I still own. Can you justify yourself to me?
Manager Tom Slater has emerged from the US stock market bull run reasonably well, but not brilliantly. He S&P 500 is at a record level after rising 34.37% in the last 12 months. Scottish Mortgage is some distance away.
Stock Underperforms
The Nasdaq is up 45.07% in the last 12 months. This means Scottish Mortgage fell at almost twice the speed during the 2022 crisis, but rose at about half the pace in the recent boom. That's not enough.
I have shares in Legal and General Global technology Index Trustcovering the same territory. It has increased 37.69% compared to the last year. Once again, Scottish Mortgage is way behind schedule.
Many are concerned about the prospects for technology and the United States. Consulting firm Longview Economics has warned that the coming months could be choppy as the Federal Reserve struggles for a soft landing and a knife-edge presidential election looms.
Suggest that “This bull run is due to a big setback”. If correct, Scottish Mortgage will no doubt also suffer a major setback, but that is none of my concern.
I don't sell stocks every time someone warns of a crisis. Timing the market rarely works. Instead, I buy and hold for the long term.
But I find it difficult to justify holding this one, given its poor performance in both bullish and bearish market conditions. I think now may be the right time to take my modest profits and sell.
