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The Scottish Mortgage share price has lost 37%. Time to buy?

The share price of Scottish Mortgage Investment Trust has collapsed by almost 37% since 5 November. But is this crash over, leaving SMT a bargain...
Photo by Milad Fakurian

Scottish Mortgage Investment Trust (LSE: SMT) is one of the UK’s best-performing (and most volatile) investment trusts. An investment trust is a fund set up as a company whose shares are listed on a recognised exchange (SMT is listed in London). Here’s how SMT shares have performed over six timescales:

The Scottish Mortgage share price slumps

Period
Gain/Loss

One day
-1.7%

One week
-2.3%

One month
-1.1%

Six months
-31.5%

One year
-11.3%

Five years
+170.4%

As you can see, the Scottish Mortgage share price has had a tough 12 months. It’s down over five periods, ranging from one day to one year. What’s more, this FTSE 100 share has crashed hard since peaking in late 2021. At its all-time high, SMT hit 1,568.5p on 5 November 2021. Alas, since Bonfire Night, this super-share has gone from firework to damp squib.

As I write, the Scottish Mortgage share price stands at 992.1p. This gives the trust a market value of £14.3bn, making it one of the UK’s biggest retail investment funds. But that’s a whopping 576.4p (-36.7%) below its November high. Despite SMT’s recent poor performance, it’s been a big winner over the past five and 10 years. So what caused its shares to crash since November?

To me, SMT is a ‘spec tech’ play

The really rip-roaring returns from Scottish Mortgage have come during the Covid-19 era. On 20 March 2020, just as the UK went into its first lockdown two years ago, this FTSE 100 share closed at 519.5p. At this point, it had gained 41.9% since 31 March 2017 (five years ago). But during the Covid-19 crisis, the tech shares that dominate SMT’s holdings skyrocketed in value. As investors new and old rushed to buy shares in electric-vehicle makers, meme stocks and crypto firms, SMT shares went to the moon. Investors who bought at 20 March 2020’s closing price would have more than tripled their money by November 2021’s high, turning £1,000 into almost £3,020 in under 20 months. Awesome.

However, since 5 November, many top tech stocks have been burned on a bonfire. Some of Scottish Mortgage’s largest holdings — including the likes of Moderna, ASML Holding, Illumina, and Tesla — have crashed spectacularly since the tech-heavy Nasdaq Composite index peaked in November. It is this ‘spec tech wreck‘ that has sent SMT’s share price spiralling southwards. But having fallen so far so fast, is SMT stock a bargain today?

Remember the dotcom boom and boost?

To be honest, the dramatic rise and fall of Scottish Mortgage comes as no surprise to me. That’s because I remember the original spec-tech bubble: the dotcom boom of 1995-1999. I also remember the Nasdaq Composite collapsing by nearly 80% from its peak in March 2000 to its low in October 2002. Yikes.

For the record, I don’t own Scottish Mortgage shares today and I don’t plan to buy them any time soon. One reason is that as an old-school value investor, I tend to avoid go-go growth stocks. Also, I’m not convinced that some of SMT’s loss-making tech firms will deliver sustained profitability. As my hero, mega-billionaire investor Warren Buffett, said on 1 May 2021: “There’s a lot more to picking stocks than figuring out what’s going to be a wonderful industry in the future”.

In summary, even after Scottish Mortgage’s five-month fall from grace, I won’t be buying this FTSE 100 share. Instead, I’ll keep my portfolio risk low by buying cheap, solid, dividend-paying UK shares!

The post The Scottish Mortgage share price has lost 37%. Time to buy? appeared first on The Motley Fool UK.

Should you invest £1,000 in Scottish Mortgage Investment Trust right now?

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More reading

The Scottish Mortgage share price is rising: should I buy now?
Should I be buying Scottish Mortgage shares?
After hitting 1,000p again, can the SMT share price fully recover?
Should I sell Scottish Mortgage Investment Trust?
Scottish Mortgage Investment Trust: have we seen the bottom?

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML Holding 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.

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© 2022 The Daily Encrypt. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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