Scottish Mortgage Investment Trust (LSE:SMT) shares caught my eye in May, when they fell as low as 690p each. I was fortunate to buy for around 700p, and so far that’s been a good investment for my SIPP.
But as many investors know, Scottish Mortgage shares almost halved in value over the last year. So let’s take a closer look at this stock’s performance and whether I should be buying more at the current price — around 910p.
Mega returns
Scottish Mortgage is a publicly traded investment trust that has significant exposure to American, Chinese and unlisted shares.
In fact, it was among the best performing investment trusts worldwide for a period of time. The fund managers have a knack for picking the next big winners.
But its growth stock focus is also why the stock is down considerably on where it was this time last year.
However, the long-term trends are still positive. In fact, if I’d invested £1,000 in Scottish Mortgage shares five years ago, today I’d have £2,116. That’s a pretty phenomenal return, but I’d be kicking myself that I hadn’t sold a year ago.
Five years ago, the stock was trading for around 420p. And last summer, Scottish Mortgage hit 1,500p a share. So, if had bought £1,000 of stock five years ago and sold last summer, I could have cashed out with nearly £4,000.
Outlook
But how do I think Scottish Mortgage is going to do perform in the years to come?
Well, I’m actually pretty bullish. But it’s not necessarily because I’m confident about the prospects of Scottish Mortgage’s main holdings, such as Tesla, Moderna, Amazon and Illumina. In all honesty, I don’t expect a huge amount of growth here.
Instead, it’s Scottish Mortgage’s smaller holdings that interest me. While I see a lot of value in companies like NIO — a Chinese EV manufacturer that’s on a similar growth trajectory to Tesla — I have a lot of faith in the fund managers to have picked other big winners.
Its star stock-pickers have a track record for buying shares in companies such as Moderna and Tesla before most people had even heard of them. Now they’re worth billions or in some cases, almost trillions.
Risks
Amid soaring inflation and a forecast global economic downturn, I have some concern about the near-term performance of growth stocks. When interest rates rise, so does the cost of growth. This won’t impact firms like Moderna, which have billions in cash right now, but other companies that rely on borrowing may be forced to rethink their growth strategies.
Would I buy this stock?
There are a few reasons why I’d buy this stock, despite the near-term challenges. For one, Scottish Mortgage is actually trading at a discount versus its estimated net asset value. But I’m also positive because of the fund managers’ track record. I’m sure they’ve got the next big winner in their portfolio already.