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Scottish Mortgage Investment Trust (LSE: SMT) has always been a bit of a dilemma for me. I like the spread of international growth and technology stocks it holds. But Scottish Mortgage shares have looked overvalued.
Still, the Scottish Mortgage share price has now fallen 50% since November’s peak. The shares have bounced up a bit since a low in June, but they’re still down 41% over the past 12 months. Is it time for me to buy?
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This is what Scottish Mortgage shares looks like now:
Though the trust has fallen in price, it’s still done well over five years. The performance is firmly down to the US NASDAQ index, which is home to most of its top holdings.
Scottish Mortgage holdings
Here are the top five holdings at 31 May, with current 12-month price moves and price-to-earnings (P/E) ratios:
| Stock | Holding | 12-month change |
Trailing P/E |
| Moderna | 7.4% | -22% | 4.6 |
| ASML | 6.7% | -38% | 34 |
| Tesla | 5.7% | +7.8% | 94 |
| Illumina | 5.4% | -59% | 43 |
| Tencent | 5.5% | -37% | 15 |
This doesn’t show the full picture, as some of these stocks peaked less than a year ago. Moderna is down 65% since August 2021, for example.
And though Tesla is up over 12 months while the NASDAQ has fallen, it didn’t peak until November. And from that high point it’s down 41%.
Investors had been pushing high-tech US stocks higher and higher for years. So I’ve seen some great companies there, but their valuations have been just too high for me. But now investors have fled from tech stocks and headed for safety.
Attractive NASDAQ value
At the time of writing, the NASDAQ is down 21% over 12 months, and down 28% since a peak in November. And as of 7 July, the index had a P/E of 22. For an index heavily weighted to global technology giants with strong growth potential, I think that’s good value.
Saying that, there’s plenty that could still go wrong. It’s always very difficult trying to time the bottom of a price fall. And while some of the stocks held by Scottish Mortgage Investment Trust look very cheap, some still do not.
I still think Tesla is still overvalued with a P/E of 94, for one. I wouldn’t risk a whole investment chunk on Tesla. But as 5.7% of any investment I make in Scottish Mortgage, the risk is offset by diversification.
Further falls?
Still, I do see a real possibility that the NASDAQ could have further to fall. And Scottish Mortgage shares could dip a fair bit further along with it.
But I’m not going to try to time it, because I’d be sure to get that wrong. Instead, I intend simply to buy now I see the shares as good value. A discount to net asset value of 10% adds an extra sweetener.
The discount has been even lower, reaching around 15%. That means I could have got in a wee bit cheaper. But I’m not worried about that. And as soon as a bit of expected dividend cash lands in my account in the next few days, I intend to buy some Scottish Mortgage shares.
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