Just over a month ago, the shares of Scottish Mortgage Investment Trust (LSE: SMT) hit a 52-week low. However, Scottish Mortgage shares have since rebounded by over 120p and are closing in on £8. So have I missed the boat, or should I buy now while stocks last?
The rise and fall of Scottish Mortgage
The shares are among the most widely held and traded stocks on the London Stock Exchange. That’s because many investors view this global technology trust as a proxy for the US tech and growth stocks in which it is invested. By the way, an investment trust is a collective investment fund whose own shares are traded on a recognised stock market.
However, after producing sparkling returns from 2019 to late 2021, Scottish Mortgage stock has crashed spectacularly since reaching an all-time high in November 2021. This was driven by the bursting of the US tech bubble, with the Nasdaq Composite index having plunged by 28.6% from its November peak.
Hence, the Scottish Mortgage share price has been riding a rollercoaster since late 2021, as these figures show:
| 52-week high | 1,568.5p (5 November 2021) |
| 52-week low | 670.6p (17 June 2022) |
| 12-month change | 38.6% |
As I write, the Scottish Mortgage share price stands at 793.22p, almost 123p (+18.3%) above the low it plummeted to just over a month ago on 17 June. However, it is down almost 39% over 12 months and has almost halved (-49.4%) from its record high on Bonfire Night 2021.
In short, this share has been highly volatile and risky, thanks to a plunge lasting more than eight months. So should I steer clear of this turbulent stock, or buy in now and hope its recent recovery continues?
Would I buy now?
Scottish Mortgage, which was launched in 1909, no longer invests in mortgages or Scotland. It’s become the UK’s most popular global technology fund, managed by investment group Baillie Gifford. The £14.3bn trust invests in high-growth and disruptive technology companies driven by innovation. Its largest shareholdings include biotech giant Moderna and Elon Musk’s carmaker Tesla.
As a veteran value investor, I see it as a leveraged bet largely geared towards listed and private US tech stocks. Though these have fallen steeply since November, I suspect that there may be more downside to come. So far, the bear market in US stocks has been caused by ‘multiple compression’ (when price-to-earnings ratios fall). However, I’m also expecting earnings downgrades to push stock prices lower in 2022-23.
In other words, my long experience (35 years and counting) leads me to believe that we’re perhaps halfway through the US bear market. I can’t say when this finally bottoms out, but I don’t think that we’re there yet. Hence, as an income-seeking value investor, I’m not drawn to buy Scottish Mortgage shares at current price levels.
Of course, I could be wrong. For example, rising interest rates could subdue currently red-hot inflation. Likewise, we could avoid a global economic slowdown or recession — or the war for Ukraine might be resolved later this year. In which case, Scottish Mortgage shares may well be a screaming buy right now. Regardless, they’re not for me!