Scottish Mortgage (LSE:SMT) shares had a phenomenal run in 2020. But some investors are concerned whether the investment trust can replicate its success in 2021. After all, past performance isn’t an indication of future performance.
I think Scottish Mortgage shares are still worth me buying though. Here I’ll explain five reasons why I’d hold the stock in my portfolio.
#1 – Experienced investment duo
I think the first thing to note is that when buying a trust, I’m really paying for the investment experience of the fund manager(s). The same applies for Scottish Mortgage shares.
The portfolio 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. This gives me some comfort that the fund managers have developed their own style at a reputable investment house and are unlikely to make knee-jerk decisions.
#2 – Long-term track record
I don’t think Scottish Mortgage’s impressive performance is a fluke. One of the things I look out for is consistent performance over the long term. With Scottish Mortgage shares, I get exactly that.
I can’t deny the trust’s strong long-term performance. This shows me that the fund managers are adaptable and can deliver strong returns during various market conditions.
This really emphasises my first reason for buying Scottish Mortgage shares. I’m paying for the investment experience of Anderson and Slater.
#3 – Unquoted companies
I think one of the great things about Scottish Mortgage is that I get exposure to some private companies as well as listed ones. Approximately 17% of the portfolio is invested in such unlisted firms.
Anderson and Slater think this space is full of compelling opportunities. Current private holdings include Stripe and TransferWise. This is another reason why I’d buy Scottish Mortgage.
#4 – Tesla
One of the concerns a lot of investors had was the large weighting to Tesla. At one point the stock accounted for 12% of the portfolio. I must admit I’ve got to applaud both Anderson and Slater on taking the large Tesla stock position and letting it run.
The fund managers called the stock right. They did well to maintain the Tesla position as it was being included in the S&P 500 index last year. Now that has happened, they’ve reduced their holding to 5.1% of the portfolio (as of the end of January).
They’ve taken profits on Tesla and I don’t blame them. It highlights to me their prudence as fund managers. A quality I like in investment professionals.
The risks
Let me pause here and say that Scottish Mortgage shares aren’t without risk. The performance delivered in 2020 isn’t guaranteed to repeat in 2021. The stock is trading close to all-time highs, which may make some investors uncomfortable.
The portfolio is concentrated and the fund managers aren’t afraid to takes large stock positions. This could go right but also could work against them. If a stock underperforms, it’s likely Scottish Mortgage shares will fall in value too.
#5 – Cost focus
What I think is refreshing is the fund managers’ focus on driving down the cost of investing. Scottish Mortgage doesn’t charge a hefty performance fee. The trust also has a competitive ongoing charge of 0.36%.
In my opinion, Scottish Mortgage shares offer investors like me a low-cost global portfolio with an impressive long-term track record. For these reasons I’d buy the stock.
