If I’d invested £1,000 in Scottish Mortgage shares 5 years ago, I’d have this much now

Andrew Woods looks at the five-year performance of Scottish Mortgage shares, wondering whether they now present an exciting buying opportunity.

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Scottish Mortgage (LSE:SMT) shares have been extremely volatile over recent years. While there’s been a more recent correction to the share price, it performed very well throughout the pandemic. I want to know though, how much I’d have now if I’d invested £1,000 five years ago. Let’s take a closer look.

Doubling my money?

A half-decade ago, the share price closed at 416p. A lot has happened since then, including the pandemic, rising interest rates, and inflation.

The shares in the listing – a tech-focused investment trust run by Baillie Gifford – are currently trading around 819p. What this means is that if I’d bought £1,000 worth of stock five years ago, it would now be worth £1,968.75. That’s nearly double my initial investment. 

The share price reached a pandemic high of 1,543p in November 2021, so my hypothetical holdings may have nearly quadrupled at that time.

There’s also a metric to gauge Scottish Mortgage’s cheapness — net asset value (NAV). This is the fair value of its underlying assets and currently sits at 911p. Given the shares are trading at 816p, I calculate their discount is in excess of 10%. I find this attractive as a potential investor.

What’s more, results have shown recent improvement. For the 12 months to 31 March, pre-tax profit hit £16.44m. This compares to £10.04m in 2021. It still has some way to go though, to recover to pre-pandemic levels in March 2020, when pre-tax profit was £24.08m.

Some challenges

There have been recent challenges however. As interest rates climb, investors have withdrawn from higher-risk sectors, including tech. This caused a sharp fall in the share price and may continue as inflation rises.

The investment trust may also be adversely affected by China’s ‘Zero Covid’ policy. This continues to impact tech businesses there, in which the trust has holdings, and has disrupted supply chains. This may however be short-term in nature.

Why I find it attractive

I like many things about Scottish Mortgage. For starters, it could provide me with exposure to the biggest tech and pharmaceutical firms in the world. These include the likes of Tesla and Moderna.

Furthermore, I could buy into two of the biggest world economies today, the US and China. I’ve already mentioned some US stocks that are held by the investment trust, but it also has holdings in Chinese heavyweights, such as Alibaba and Tencent. I may also gain exposure to unlisted firms like SpaceX. 

Additionally, I can benefit from the investment expertise of the Baillie Gifford managers. They have a strong track record, having invested in Tesla when it was a much smaller, younger company.  

Overall, Scottish Mortgage shares have performed well over the past five years. The near 100% increase over that time speaks for itself. Although there remain difficulties in the broader market, the investment trust has many attractive traits.

As such, I’ll be adding the shares to my portfolio soon.

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 assessed. Consider taking independent financial advice.

Andrew Woods has no position in any of the shares mentioned. 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.

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