The performance of Scottish Mortgage Investment Trust (LSE: SMT) has been disappointing of late. At today’s share price of 780p, the trust is trading nearly 50% below its highs (set in late 2021).
I hold some Scottish Mortgage shares in my own portfolio, so I have been impacted by the decline in the share price. The question is – should I buy, sell, or hold in 2024?
I’m bullish
Looking at the trust’s investment strategy and holdings, I have to say I’m quite bullish on it as we start 2024. I think the share price has now bottomed, and that it’s likely to move higher from here.
One of the reasons the trust has slumped in recent years is the interest rate environment.
Scottish Mortgage invests in a lot of up-and-coming disruptive technology companies. And higher interest rates are not good for these kinds of companies (they often need debt to fund their growth).
Interest rates are likely to come down this year however. In the US (where the trust has exposure of around 50%), there’s a good chance we’ll see multiple rate cuts in 2024.
Lower rates should boost the share prices of the companies in the trust, as well as the Scottish Mortgage share price itself.
Another factor that’s worth mentioning is the discount to the trust’s Net Asset Value (NAV). Currently, it’s around 12%, meaning the trust’s trading at a substantial discount to the value of its assets.
If sentiment towards tech stocks was to improve in the UK (which I think it will), there’s a good chance this discount will dip, pushing the share price up.
The portfolio
Zooming in on the trust’s holdings, I like what I see.
Stock
Weighting
ASML
6.5%
Mercadolibre
5.6%
Nvidia
5.1%
PDD Holdings
4.9%
Amazon
4.8%
Tesla
4.5%
Moderna
4.4%
Space Exploration Technologies
3.7%
Northvolt
3.2%
Ferrari
3.0%
Top 10 holdings as of 30 November 2023. Source: Scottish Mortgage Investment Trust
For a start, it’s invested in companies that are at the heart of the global technology revolution.
I’m talking about companies like chip designer Nvidia, chip manufacturing equipment maker ASML, and e-commerce and cloud computing powerhouse Amazon. These are all technology giants with a lot of growth potential.
Secondly, the trust looks far more diversified than it used to be. A few years ago, Tesla was 9% of the portfolio. Today however, the stock is only 4.5% of the portfolio.
Third, I like the exposure to Space Exploration Technologies (SpaceX). This still-unlisted company looks to have enormous growth potential as it’s a major player in the satellite broadband space.
Overall, it’s a solid portfolio of growth stocks, in my view. I’m very comfortable with the portfolio as we start 2024.
I’m buying
Given the improving outlook and the holdings, I see the trust as a ‘buy’ for me as we start 2024. And I’ve been putting my money where my mouth is.
Already this year, I’ve purchased two tranches of Scottish Mortgage shares, increasing the size of my holding significantly.
Now, this is a higher-risk investment trust. Due to its disruptive technology focus, it can be volatile.
I’m comfortable with the risks though. And I have ‘right-sized’ my position here. If the trust was to crash again, it wouldn’t have a catastrophic impact on my overall portfolio.
The post Scottish Mortgage Investment Trust review: buy, sell, or hold for 2024? appeared first on The Motley Fool UK.
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Edward Sheldon has positions in ASML, Amazon, Nvidia, and Scottish Mortgage Investment Trust Plc. The Motley Fool UK has recommended ASML, Amazon, Nvidia, and Tesla. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
