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Scottish Mortgage Investment Trust (LSE:SMT) shares finally appear to have ended their steady decline. So maybe it’s time to look beyond the short-term gloom reflected in global markets right now and focus on the long-term potential.
I bought Scottish Mortgage for my pension when it was trading around 700p, but today the fund is trading for 784p. In fact, the shares are up 10% over the last week. I was also looking to add this fund to my Stocks and Shares ISA. So have I missed my chance?
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What does Scottish Mortgage do?
Scottish Mortgage is a publicly traded investment trust which focuses heavily on growth stocks, notably those listed in the US and China, as well as unlisted companies. Its share price reflects the value of the stocks it holds.
It had been one of the most successful funds in recent years, but it recently lost its position as the UK’s largest investment trust in market-cap terms.
Its well-publicised fall, from a high of around 1,500 per share in November to less than 700p in June, reflects the fortunes of the tech industry.
Inflation, higher interest rates, and negative economic forecasts, have all weighed on growth stocks.
Scottish Mortgage’s portfolio
Its five biggest holdings are Moderna, Illumina, ASML Holding, Tesla and Tencent. Collectively these five stocks represent 31% of the portfolio.
With the exception of Tesla, all of these stocks are down over the past year. In fact, the remaining four are all down more than 30% over the past 12 months. Tesla is actually up over 12 months but has fallen considerably since the beginning of the year.
Moderna is the trust’s biggest holding and it has collapsed from highs of nearly 500p a share to 159p today.
Scottish Mortgage’s 10th-biggest holding is French luxury goods firm Kering. The fashion giant, which owns high-end brands including Gucci, Saint Laurent and Alexander McQueen, is the only non-tech stock to feature in the top 10. It has also underperformed over the past 12 months.
Am I too late to buy?
So have I missed my chance to add this trust to my Stocks & Shares ISA? There’s a lot of volatility right now, so I wouldn’t be surprised to see the share price fall again in the coming weeks. But I’d still consider now a good time to buy.
Scottish Mortgage is known for picking the next generation of big winners. It bought Tesla and Moderna before people knew about them and made billions.
The next big growth stocks could already be in its portfolio. We’re definitely going through a challenging time right now for growth. But the picture for the long term, notably around tech and the green revolution, remains largely unchanged.
Moreover, the portfolio is very diverse in its exposure to growth. Scottish Mortgage has over 100 holdings, over 50 of which are unlisted shares, such as SpaceX.
One thing that concerns me is the fund’s exposure to China and Beijing zero-Covid policy. Around 20% of the fund’s investments are in Chinese firms. Further lockdowns could hurt performance.