Scottish Mortgage shares have slumped 40%. Time to buy now?

Scottish Mortgage Investment Trust (LON: SMT) shares have rewarded shareholders well in recent years. I’m thinking of buying now they’re down.

| More on:

Scottish Mortgage (LSE: SMT) shares have fallen 40% so far in 2022, after climbing in 2021. In fact, the shares are down 50% since their 52-week high in November.

This is Baillie Gifford’s flagship investment trust we’re taking about here. It invests in a diversified portfolio of US growth stocks that I see as riskier individually. So what’s the reason for the slide, and should I buy now?

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

The Scottish Mortgage share price chart for the past 12 months is not pretty:

It looks like it’s all down to a falling out with technology, including biotech. A whole raft of companies in those areas have faced a big sell-off this year as economic woes have escalated.

Scottish Mortgage holdings

Companies like Tesla, Moderna, Illumina, ASML… they’ve all been falling. And those four are among SMT’s top 10 holdings, as of 31 March.

Growth stocks like these are often valued on high price-to-earnings (P/E) multiples. Even now, for example, Tesla is still on a trailing P/E of over 100. That means it would take 100 years of last year’s earnings to cover the value of the shares.

To put that into some kind of perspective, the average P/E of the Nasdaq, America’s tech stock index, is only around 21. Apple‘s is 24.

Looking at other stocks in SMT’s top 10, Nvidia is down 40% since the start of the year, Alibaba has dropped 26%. Even mature online retailer Amazon has lost 32%. The remaining three are Tencent, Kering, and Meituan.

Growth investing

Those 10 stocks made up 44% of SMT’s total holdings, so it’s no wonder Scottish Mortgage shares have fallen in 2022 too. But what can we learn from it? I’m also wondering whether it’s a good time to buy now. I think it just might be.

The first lesson for me is that I would only invest in high-value tech stocks if I was prepared to take this kind of hit from time to time. My approach to overcoming such hurdles in my investing is to stick with it for the long term.

Long-term SMT performance

Even after the big 2022 tech stock sell-off, the Scottish Mortgage Trust share price has still just about doubled over the past five years. The FTSE 100, by comparison, has gained only 0.5%.

And over 10 years, we’re looking at a gain of 445% for SMT, with the index managing just 40%.

Growth stocks do tend to go through cycles. They often go through ups and downs, and the downs can be great times to buy.

Buy now?

Right now, I’m seriously thinking of buying SMT shares. They’re on a discount to NAV of 8.4%. That just means the shares are priced at 8.4% less than the value of the assets they represent. I’m also drawn to the current Nasdaq valuation, which does not look high right now.

Against that, the outlook for tech shares could be weak for a few years now. I need to do more research before I decide.

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

Before you consider Scottish Mortgage Investment Trust, you’ll want to hear this.

Motley Fool UK's Director of Investing Mark Rogers has just revealed what he believes could be the 6 best shares for investors to buy right now… and Scottish Mortgage Investment Trust wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 shares that are currently better buys.

All you need is an email address to get started

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML Holding, Amazon, Apple, 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.

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.

More on Investing Articles

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

£10,000 invested in BT shares 10 years ago is now worth this much

It's painful to remember that BT shares reached over £10 at the peak of the dot com bubble in 1999.…

Read more »

Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Investing Articles

Is now the time to buy bank shares?

Our writer considers whether bank shares could be a bargain buy for his portfolio right now -- or a potential…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

After steep falls, are Royal Mail shares a steal?

Royal Mail shares have more than halved since peaking a year ago. After months of steep falls, this popular stock…

Read more »

Young Woman Drives Car With Dog in Back Seat
Investing Articles

Dirt-cheap, 1 of my best stocks to buy also pays an above-average dividend!

This Fool has decided to buy the shares on his best stocks to buy now list with the shares looking…

Read more »

Light bulb with growing tree.
Investing Articles

The AFC share price just tanked! Is now the time to buy?

The AFC share price fell nearly 10% on Wednesday after the H1 revenue announcement. So, should I add this stock…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

These shares have been growing dividends for decades. I’d buy!

Our writer considers the merits for his portfolio of buying two shares with a track record of growing dividends.

Read more »

Close-up of British bank notes
Investing Articles

Is the M&G dividend yield heading to 10%?

As the M&G dividend yield heads towards double digits, out writer explains why he is considering buying more of the…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

3 top dividend shares to buy now

With weakness in the markets, I reckon it's a good time to search for top dividend shares to buy now.

Read more »