I see so many good value shares on the UK stock market right now, I have a hard time deciding where my next investment cash is going to go. This time, I’ve bought some Scottish Mortgage Investment Trust (LSE: SMT) shares.
Before I explain my reasons, I just want to look at why it’s still a risky investment for me. It’s all about growth shares, specifically US technology shares. I’m talking Tesla, NVIDIA, and other Nasdaq stocks like that.
The big risk is that they’re very hard to put a valuation on, often trading a price-to-earnings (P/E) ratios that defy my understanding. The thing is, I’m convinced that most of them will be successful in the long term. And if I understood the individual companies better, I’d be in a stronger posit to invest in them.
Bear market
The Nasdaq has entered bear market territory, which means it’s fallen by at least 20%. Some constituents have dropped even further. So surely that reduces the risk of my poor ability to value these companies.
Top holdings
That’s where Scottish Mortgage Investment trust comes in. Here’s its top 10 holdings as of 31 May, together with 12-month share price movements and latest trailing P/E ratios:
| Stock | Holding | 12-month change | Trailing P/E |
| Moderna | 7.4% | -48% | 5 |
| ASML | 6.7% | -30% | 41 |
| Tesla | 5.7% | +13% | 110 |
| Illumina | 5.4% | -58% | 43 |
| Tencent | 5.5% | -39% | 14 |
| Meituan | 3.4% | -30% | N/A |
| Amazon.com | 2.7% | -30% | 59 |
| Kering | 2.5% | -27% | 21 |
| NVIDIA | 2.5% | -7% | 48 |
| Northvolt | 2.5% | N/A | N/A |
There are some big falls there. But those are just over an arbitrary 12-month period.
Tesla stock, for example, is down 34% from its 52-week high. And NVIDIA has fallen 48% from its peak.
Some of those P/E multiples still make me squeak a little. But the overall Nasdaq P/E currently stands at 21. And I reckon that’s good value for the top US growth index.
So I reckoned I was looking at a rare chance to buy into a range of US and international high-growth stocks at a time when the majority of them have suffered significant share price falls.
That stretches beyond any individual valuation judgments, and I thought it was an opportunity I just couldn’t pass up.
Scottish Mortgage share price
In addition, the Scottish Mortgage share price had fallen further, giving up the big recent gains that I reckon had sent it overvalued. At the time of writing, the price is down 34% over the past 12 months. And in a rare example of fortunate timing, I even got in a bit lower than that.
Scottish Mortgage shares are currently on a discount of 7.6% to their underlying asset value, and it was around 10% when I bought. That means we can invest in those tech stocks at a little bit less than their actual share prices.
This is a risky investment for me, and I know I could be facing some short-term volatility. It also goes against my usual rule to only invest in companies that I understand well.
Still, I think this is the time to go with a different rule: Ignore all rules.