Scottish Mortgage shares: 5 reasons why I’ll buy in 2021

Scottish Mortgage shares have delivered stellar gains in 2020. Will this impressive performance continue? Nadia Yaqub takes a closer look.

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The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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There’s no denying that Scottish Mortgage Investment Trust (LSE: SMT) shares have had a stellar run. Investors who purchased the stock at the start of 2020 are sitting on some very attractive gains.

Scottish Mortgage shares increased 107% last year, but is this rise set to continue? Here are five reasons why I’m still buying the investment trust in 2021.

#1 – Technology exposure

Technology remains a key theme in Scottish Mortgage’s concentrated investment portfolio. Stocks such as Amazon and Alibaba are within the top 10 holdings of the trust.

Technology companies performed well in 2020 as many people adapted to working from home during the pandemic. I think this trend is likely to continue into 2021 as the coronavirus crisis is far from over and some behavioural shifts will become permanent.

I believe last year highlighted the changing needs of consumers. The way we communicate with each other and the increasing amount of data available mean that going forward companies will need technology to adapt and innovate. Scottish Mortgage shares are well positioned to reap the rewards from this demand.

#2 – Experienced investment duo

Scottish Mortgage is run by investment duo James Anderson and Tom Slater. Both have been with Baillie Gifford, the asset manager behind the trust, for a long time.

They have a wealth of experience and are not afraid to take large positions. Tesla, which has had a phenomenal run, makes up 12% of the portfolio. Anderson and Slater have done well to maintain the position since the company was included in the S&P 500 index at the end of 2020.

Although Scottish Mortgage shares are at all-time highs, I know that I’m really paying for the investment experience of the fund managers.

#3 – Long-term track record

I don’t think Scottish Mortgage’s impressive performance is a fluke. The trust has consistently performed well over the long term. This shows me that the fund managers are adaptable and can deliver strong returns during various market conditions.

This really emphasises my second reason for buying Scottish Mortgage shares. I’m paying for the investment experience of Anderson and Slater.

#4 – Unquoted companies

When buying Scottish Mortgage shares, not only do I get exposure to some great public stocks, but there’s a weighting towards unquoted companies. These are generally younger businesses that aren’t listed on the stock market. Instead they will approach investors like Scottish Mortgage to expand and develop.

Anderson and Slater have approximately 17% of their portfolio invested in unquoted companies and they think this space is full of compelling opportunities. Current unquoted holdings include Stripe and TransferWise.

This mix of public and private companies in a portfolio means that I’m getting the best of both worlds.

#5 – Cost focus

What I think is refreshing is the fund managers’ focus on driving down the cost of investing. Unlike Bill Ackman’s Pershing Square, Scottish Mortgage doesn’t charge a hefty performance fee. The investment trust also has a competitive ongoing charge of 0.36%.

In my opinion, Scottish Mortgage shares offer investors a low-cost global portfolio with an impressive long-term track record. For these reasons I would still buy the stock in 2021.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Nadia Yaqub has no position in any of the shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alibaba Group Holding Ltd., Amazon, and Tesla and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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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