Scottish Mortgage (LSE:SMT) shares are among the most watched on the FTSE 100. The share price collapsed towards the end of 2021 as investors moved away from growth stocks. Scottish Mortgage — a publicly listed investment trust — is heavily focused on growth and has significant exposure to American, Chinese and unlisted shares.
The trust is down 4% over the past week and now trades below £9. It had been a lot lower before its summer bull run. In fact, I was able to buy it around £7 for my SIPP.
But I’m looking to buy more for my ISA, and I think sub-£9 might be a good entry point. So let’s take a closer look at this stock and explore Scottish Mortgage’s outlook.
A turbulent year
Scottish Mortgage shares plummeted from highs of over £15 a share last year to less than £7 in May. The value of Scottish Mortgage shares reflects that of the value of the stocks it owns. So as holdings in growth stocks tanked in late 2021 and early 2022, so did Scottish Mortgage. Likewise, the more recent uptick has reflected a rebound for growth and tech stocks.
Earlier this year, it was clear that Scottish Mortgage would bottom out eventually, and £7 seemed about right. And since May, growth and tech stocks have largely outperformed value stocks.
This is partly because valuations started to look very attractive, but also because several tech stocks including Apple, Amazon and more recently Tencent, beat expectations in their much-awaited Q2 earnings. The latter two are both part of Scottish Mortgage’s top 10 holdings.
Outlook
I often note Scottish Mortgage’s track record of picking the next big winner. The trust invested in Amazon and Tesla before they were household names and naturally, the returns were huge.
So one reason I like Scottish Mortgage is because their team has a knack for stock picking, and I’m hoping they’ve already bought shares in the next big winner.
However, there has been a change at the top. Baillie Gifford, which runs the Scottish Mortgage portfolio, is currently trying to adapt to life post-James Anderson after he retired three months ago. The fund is now bleeding money according to Bloomberg.
Nevertheless, I’m confident that its modus operandi of investing in innovation won’t change.
However, I’m not overly confident that the top 10 holdings, with the exception of NIO, will deliver much growth in the years to come. Instead I think the younger, lesser known holdings will be the source of growth. In fact, NIO is the only company in Scottish Mortgage’s top 10 holdings that I hold myself.
So would I buy more Scottish Mortgage shares at the current price? Yes, I would. However, I appreciate a downturn in economic growth worldwide and higher interest rates might pull some of its holdings down in the near term, but in the long run, I’m bullish on this innovation-focused trust.
