Scottish Mortgage Investment Trust update: share price down as tech stocks crash
Scottish Mortgage Investment Trust has been remarkably successful over the years but is now trading at a discount to its NAV due to falling tech stocks. Saloni Sardana looks at how the trust is doing.
Scottish Mortgage investment trust (LSE: SMT) is one of the components of the MoneyWeek investment trust portfolio. It’s been remarkably successful – its net asset value (NAV), which shows the value of the underlying assets held by the fund, has risen by 1,007% in ten years compared with a 271% increase in the FTSE All Share Index – its benchmark – in the same period.
Its shares normally trade at a premium to its NAV, but, with the share price down by more than 30% since November, it is now trading at a 1.4% discount to NAV at around 1,045 pence per share.
So what’s changed?
Scottish Mortgage focuses on growth stocks and has not been immune to the recent turmoil in markets which has seen a slide in “jam tomorrow” assets – partly due to the Federal Reserve turning hawkish on inflation and demonstrating a willingness to raise interest rates faster than the market expected.
“This has hurt the individual stocks themselves, and trusts like SMT,” says Jabran Khan in The Motley Fool. But Scottish Mortgage is still a good buy, he reckons, even with co-manager James Anderson’s impending departure on 30 April. Anderson’s co-manager, Tom Slater (who joined Merryn on the MoneyWeek podcast last April) will be staying on, and Khan believes that “under Slater’s guidance alone, the trust will continue to excel and provide positive returns over the long term”.
As at 31 December, vaccine maker Moderna remained the top holding, although it has fallen from 10.5% of the portfolio to 8.1% since the end of November. Semiconductor lithography specialist ASML comes second, accounting for 6% of the portfolio, while genetic analysis group Illumina replaces electric car maker Tesla as the third-top holding.
In its third-quarter report last year, Scottish Mortgage said it had been affected by China’s regulatory crackdown on the tech sector, which hit some of its holdings. But its portfolio of healthcare companies has gone a long way to offsetting any weakness.
Positions in ecommerce companies Tencent, Alibaba and shopping platform Meituan dragged down performance in its portfolio in the third quarter, and it delivered less than half the returns compared to last year at 44.5%. It still beat its benchmark – the FTSE All World Index, which managed a gain of 22.7% for the same period.
But SMT said back then that it was still optimistic about investing in China as “Alibaba and Tencent both continue to grow revenue in excess of 20% whilst Meituan and Pinduoduo are both growing considerably faster”, said Slater and Anderson.