I’m currently looking at Scottish Mortgage Investment Trust (LSE:SMT). This technology fund focuses on innovation and looks for shares to own over a five-to-10-year period. What I like about the fund is that it’s focused on three big themes: the digital transformation of the world; the intersection between biology and technology; and clean energy. All three could become areas of focus over the coming years.
The rise and fall of the Scottish Mortgage share price
It has been a top performer over many years, but its share price accelerated notably when the pandemic hit. The world very quickly needed what many of the companies from this trust do or make and in 2020, the Scottish Mortgage share price more than doubled.
That said, economic drivers have changed since then and the reopening of many economies (among other factors) has shifted investment pounds and dollars into other sectors.
The Scottish Mortgage share price has experienced a dramatic 28% fall in a year. But I’d say many of the high-growth companies in the fund still have promising futures.
Take Moderna for example. It was a pioneer of mRNA-based Covid vaccines, but it’s applying its technology to a much wider range of health issues. I reckon it could grow to become a much larger business in a few years and Scottish Mortgage currently holds it as its largest position.
Innovative holdings
The second largest share in the fund is electric vehicle giant Tesla (NASDAQ:TSLA). Scottish Mortgage was an early investor in this EV maker. As such, it reaped significant rewards as Tesla’s share price soared by 1,600% over the past five years. I’m impressed with the trust’s managers that saw its potential at a time when many investors were uninterested.
Tesla recently released an encouraging update that showed record profitability and vehicle deliveries. But there’s so much more that indicates it could become a much larger business in the years ahead. It’s currently experiencing rapid growth and could exceed 50% annual growth over the next few years. That’s impressive.
Tesla has been built on a platform of innovation. So it’s not much of a surprise to see new ideas being implemented. In fact, it’s working on a new vehicle that’s a dedicated robo-taxi that has no steering wheel or pedals. Other business areas with great potential include batteries, insurance and solar.
There are no guarantees that all of these ventures will be successful, and some elements might take longer than planned. But I reckon Scottish Mortgage is an excellent way to gain exposure to this growth stock.
Are the shares now a bargain?
So has the Scottish Mortgage share price reached bargain territory? I think the answer would depend on my investment timeframe.
There are still risks on the horizon for many of the shares in this fund. If the US Federal Reserve decides to speedily raise interest rates to tackle persistently high inflation, it could push share prices for growth stocks even lower.
That said, given the long-term prospects of these companies, I would consider that to make them an even bigger bargain. As a long-term investor, if I’m willing to accept short-term hurdles, buying now could look like a good deal in hindsight.
Yet with near-term risks, I won’t be buying today. However, I will add it to my watchlist.
