Scottish Mortgage shares keep diving. Surely it’s time to buy?

Scottish Mortgage shares have lost a third of their value in the past year. After a terrible start to 2023, is this FTSE 100 stock too cheap now?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Stack of British pound coins falling on list of share prices

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Scottish Mortgage Investment Trust (LSE: SMT) shares have crashed hard since peaking in November 2021, at the height of the US tech bubble. After plunging over 17 months, is there finally light at the end of the tunnel for stunned shareholders?

A staggering slump

As I write, Scottish Mortgage stock stands at 652.94p, up 1.6% since Wednesday’s close. However, the shares have been a complete lemon for ages, as the following table shows:

Five days-3.7%
One month-9.2%
Year to date-9.7%
Six months-14.0%
One year-33.3%

Over all five periods ranging from five days to one year, this stock has destroyed value. Even worse, it’s down by exactly a third in one year. Over that time, the FTSE 100 index is up 2% (excluding dividends).

In short, Scottish Mortgage shares have been an utter dog in 2022/23. Still, at least they have risen by more than half (+51.4%) in the past half-decade.

Sadly, almost all shareholders who bought into this trust pretty much anytime since May 2020 will have lost money — on paper, at least. Yikes.

I’ve been a big bear of Scottish Mortgage shares

Since 2020/21, I have been very bearish (negative) towards this FTSE 100 stock. That’s when it was blown up into an almighty bubble during the tech boom of 2020/21. When the ‘tech wreck’ arrived in late 2021, this stock imploded.

I’m very relieved never to have invested in this £13.4bn trust’s shares to date. But after such gut-wrenching falls, I suspect there could be hidden value in this former growth stock.

When the facts change, I change my mind

The above phrase is often attributed to eminent British economist John Maynard Keynes (and also Sir Winston Churchill). It reminds me that there’s nothing wrong with reversing long-held beliefs when the time is right.

After brutal falls for this popular and widely held stock, I’ve moved into the bull camp for Scottish Mortgage shares. Not least because the trust’s shares now trade at a discount of more than a fifth (-21.4%) to their underlying asset value. That’s akin to buying £100 of shares for £78.60.

Also, I feel that my family portfolio would benefit from higher exposure to global growth and tech stocks. So why not get this investment on the cheap via the UK’s most popular global technology fund?

From dog to star?

If Scottish Mortgage shares keep falling, then they could become a screaming buy at some point. But I’m not skilled, smart, or lucky enough to know when this will happen. Then again, same for everyone else, right?

In summary, I think current price levels offer an opportunity to board the Scottish Mortgage bus at reasonable value. Therefore, my wife and I intend to buy some of this sinking stock when we have enough cash to spare!

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.

Cliff D'Arcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

Could these beleaguered FTSE 100 stocks stage a turnaround?

Could these FTSE 100 stocks be primed for recovery after difficult times? Sumayya Mansoor takes a look at what could…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

Is this FTSE 100 giant one of the best income stocks out there?

Our writer takes a closer look at this medical business as a potential income stock for her portfolio, even though…

Read more »

Bournemouth at night with a fireworks display from the pier
Investing Articles

£2k in a Stocks and Shares ISA? One top stock I’d buy before the New Year!

Here's one US stock this writer thinks could grow for a long time to come and deliver attractive returns in…

Read more »

Front view photo of a woman using digital tablet in London
Investing Articles

How I’d invest £4k in my SIPP with the aim of doubling my money

Jon Smith talks through how he'd use dividend growth stocks to grow a SIPP pot consistently to achieve strong long-term…

Read more »

Stack of one pound coins falling over
Investing Articles

£3 a day vs £30 a day passive income plan

What’s the difference between a £3 a day and £30 a day passive income plan? More to the point, how…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Is the British American Tobacco (BAT) share price NOW too cheap to miss?

The BAT share price has sunk again after another chilly market update. But is the company now a brilliant bargain…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

I’m using December to snap up cheap shares!

This Fool is keen to use this month to add some cheap shares to his portfolio. Here he examines one…

Read more »

Investing Articles

Could Rolls-Royce retain its share price gain and more?

The Rolls-Royce share price has impressed in 2023. I particularly like management’s fresh impetus on quadrupling profits and sustainable aviation…

Read more »