The Scottish Mortgage Investment Trust (LSE:SMT) share price has risen 3.5% since the start of 2024. Given its performance over the past decade or so, this is disappointing.
However, it would’ve been higher (approximately 13%) had it not been for the tech stock wobble in July and August. That’s because it only invests in high-growth companies. The likes of Nvidia, Tesla, and Meta Platforms have a big influence on the trust’s valuation.
However, there’s one of its holdings that I find particularly interesting. And that’s its stake in Space Exploration Technologies (SpaceX), the group that sends rockets into orbit. One of its subsidiaries is Starlink Services, which aims to provide broadband in parts of the world where presently there isn’t any.
What’s it worth?
Based on the trust’s own assessment, at 31 August 2024, the investment accounted for 4.8% (£636m) of its £13.26bn assets.
Unfortunately, SpaceX is a private company and there’s no way of knowing how many shares it has in issue. However, we do know that at 30 June, Scottish Mortgage owned four different classes of stock. I’m not sure what rights are attached to each but I’m going to assume they all rank equally.
Forbes published an article on 27 June, based on leaked details of a round of fund raising, suggesting that SpaceX was worth $210bn. If the trust’s fund manager places a similar valuation on the company, we can assume that Scottish Mortgage owns 0.3%.
But valuing private companies is difficult as there’s no market for their shares. Earnings can also be volatile. Liquidating these holdings into cash (should the need arise) can also be problematic.
And this could be one of the reasons why the trust has lagged behind the FTSE 100 this year. At the end of June, 51 of its 93 holdings were in unlisted companies. Although they only accounted for 24.8% of the total value, they’re an important part of the portfolio.
Out of this world
Ron Baron, the billionaire investor, reckons SpaceX could be worth $500bn by 2030. Others are forecasting a valuation closer to $1trn.
If Baron is right, Scottish Mortgage’s stake could be valued at $1.5bn (£1.13bn) by the end of the decade, possibly adding 5% to its market cap.
The truth is nobody knows what it’s likely to be worth. And in some respects it doesn’t really matter. The point of having a stake in an investment trust is that it’s possible to have interests in lots of stocks through a single shareholding. This helps spread the risk. It also increases the possibility of finding a winner.
But I think now could be a good time for me to invest. The US tech sector appears to have settled down after the recent sell-off. And the trust is currently trading at a discount of 10% to its net asset value. This could be due to its exposure to unlisted businesses. But I’m sure volatility in the sector is also one of the reasons.
Source: Hargreaves Lansdown / net asset value (pink) versus share price (blue)
However, I’m convinced that it has a portfolio of high-quality companies that should deliver over the longer term. Also, its manager has a good track record of delivering impressive returns for shareholders. I’m therefore going to keep the stock on my watch list for when I’m next able to invest.
The post Could SpaceX help the Scottish Mortgage share price take off? appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown Plc, Meta Platforms, Nvidia, and Tesla. 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.
