Is Scottish Mortgage Investment Trust now a bargain growth stock?

The Scottish Mortgage Investment Trust share price has plummeted nearly 50% from its 52-week high. Is this a great opportunity to buy cheap shares?

| More on:
man in shirt using computer and smiling while working in the office

Image source: Getty Images

Scottish Mortgage Investment Trust (LSE: SMT) is a FTSE 100-listed fund that focuses on growth stock investing with significant exposure to American, Chinese and unlisted shares. The Nasdaq 100 is now in a bear market. The S&P 500 and Shanghai Composite are in deep correction territory. In this context, it’s unsurprising the Scottish Mortgage share price has halved since reaching 1,568.50p in November 2021.

I last covered Scottish Mortgage in February when its share price was 1,063p, concluding it was not the right time for me to buy as further drawdowns looked likely. With the share price below 800p today, is the stock now too cheap for me to ignore?

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!

A star performer falling back to Earth

There’s no denying Scottish Mortgage has been a stellar investment over recent years. The FTSE 100 index is at the same level it was five years ago.But Scottish Mortgage is up 187%, even accounting for the substantial haircut over the past six months.

The outperformance of Baillie Gifford’s flagship fund is largely a result of its concentration in growth stocks. However, many of these investments have suffered as stagflation worries continue to fuel heavy selling in stocks with lofty valuations.

Scottish Mortgage’s top 10 holdings, which constitute over 44% of its total portfolio, have all experienced significant drawdowns in 2022, ranging from -20% to -42%. These positions include big pandemic winners, such as Moderna, Tesla and Nvidia.

Moreover, James Anderson, the Scottish Mortgage portfolio manager for 22 years, retired from Baillie Gifford last month. Anderson’s widely credited for spearheading the fund’s growth from around £1bn of total assets in 2000 to over £16.9bn today.

His loss presents a challenge. Shareholders will closely monitor whether the investment trust can continue to outperform without Anderson at the helm.

Can the stock reach new highs?

The global macroeconomic outlook seems bleak. Inflation rates in many countries are at generational highs, central banks are hiking interest rates, and recessions are anticipated for 2023.

However, Scottish Mortgage takes a long-term view. In Anderson’s words, it concentrates “on the beneficial trends of decades, not the specifics of the current preoccupations of the moment“.

I believe many of the fund’s top holdings will return to new highs once this economic cycle runs its course. What’s more, the Scottish Mortgage share price currently sits at a 7.8% discount compared to the net asset value of its investments. This suggests the stock could be cheap at current levels.

Finally, as an investment trust, it can be nimble in adapting its portfolio. The fund’s lead portfolio manager, Tom Slater, jointly shared responsibilities with Anderson since 2015. This makes Anderson’s departure less disruptive than it might first appear and Slater may well emulate his success with his own conviction stock picks.

Should I buy Scottish Mortgage Investment Trust today?

I see room for further selling in SMT’s key holdings as the bear market stateside matures. However, its share price is considerably cheaper than it was in February. I view the current level as an attractive entry point for me to start building a long-term position in Scottish Mortgage shares over the coming months, capitalising on any dips that may occur.

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

Charlie Carman owns shares in Tesla. The Motley Fool UK has recommended 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 »