FTSE 100 incumbent Scottish Mortgage Investment Trust (LSE:SMT) is currently trading at an all-time high. This is due to an excellent leadership team picking some excellent stocks and consistent returns. Should I add shares to my portfolio at current levels?
Consistent performer on the FTSE 100
Scottish Mortgage is a publicly traded trust that invests in stocks across the world. It has a diverse portfolio of companies in its trust but its primary focus is on strong businesses with above-average returns. As it stands, SMT is classed as the largest investment trust in the UK.
As I write, SMT shares are trading at an all-time high of 1,433p per share. Since 2000, the share price has increased by over 1,500%. In the past 12 months alone, shares are up 44% from 991p per share to current levels.
It hasn’t all been smooth sailing this year for SMT, however. There was a small dip in the past few months but it seems to have recovered from this to surge to its current price. This was due to one of its star fund managers announcing his departure after a long tenure. In addition to this, a dip on the FTSE 100, primarily for tech stocks, which SMT is heavily invested in, caused valuation concerns for investors.
Why I like Scottish Mortgage Investment Trust
There are two primary reasons I like SMT shares right now.
- Diversification. SMT offers good levels of safety as well as returns due to its diverse range of stocks it invests in. Rather than banking on one sector or industry it is protecting itself by investing across a multitude of industries. Some of these include a substantial amount of its portfolio in tech stocks, which I am a fan of. Furthermore, it invests in e-commerce, pharmaceuticals, and cryptocurrency too. Some of the stocks it currently holds in its portfolio include Moderna, Amazon, Tesla, and NIO.
- Dividends. SMT has increased its dividend for 39 years in a row. Not many FTSE 100 stocks can attest to such a feat. It is worth noting that there are other investment trusts out there that have done similar. And there are other dividend stocks that may have higher dividends but not the same record of consistency. I understand the past is not a guarantee of future performance but it is a good gauge for me.
Risks and my verdict
Investing in Scottish Mortgage shares does have risks, however. Firstly, I found it invests heavily in US and Chinese growth stocks, such as Moderna, Tesla, and Alibaba. My issue is growth stocks and these markets in particular are prone to volatility. If they were to experience any headwinds, this could affect the SMT share price.
As I mentioned earlier, one half of the duo who run Scottish Mortgage is departing next year. James Anderson will leave Baillie Gifford, the asset management firm behind SMT, next year. This could affect progress as well as investor sentiment. Tom Slater, the other half of the duo is staying on and has lots of experience to steady the ship, however.
Overall, I do believe Scottish Mortgage Investment Trust is an excellent FTSE 100 option for my portfolio. I’m considering adding some shares to my portfolio at current levels.