Scottish Mortgage (LSE: SMT) shares increased by 11% during a terrific May for the firm. The start of June has been good too, with another 3% whacked on the value.
Here’s what caused that leap, along with whether I think this stock is still a buy right now.
The AI effect
May 2023 may well go down as an historic month for artificial intelligence stocks.
Nvidia – which makes up 3% of Scottish Mortgage’s portfolio – smashed earnings and its share price jumped 26% in an hour and a half.
Shareholders earned a cool £180bn in the time it takes a football game to be played.
Scottish Mortgage shares bumped higher too and have risen almost every day since. The fund’s tech-heavy portfolio seemed to strike a chord with investors last month.
2,500% returns
I actually bought into Scottish Mortgage earlier this year and watched happily as its shares surged. I bought in for two reasons.
First, the fund boasts one of the best track records going. If I’d bought shares in 2008 after the financial crisis, I would’ve seen 2,500% returns up to 2021.
This 25-times return was driven by investments that include some of the most exciting tech companies the world over.
Examples include Netherlands-based ASML – a chipmaker that could be at the heart of AI, the ‘Latin American Amazon’ MercadoLibre and China’s Tencent.
Living in the UK, it’s not simple to invest in or research some of these companies. But Scottish Mortgage is based in Edinburgh and listed on the FTSE 100, so I can easily get exposure by buying into the fund.
Exposure to SpaceX
While that 11% surge came as good news, the stock is still down 54% from its high in 2021. Being able to buy at nearly half the previous share price does seem like a tempting discount.
What’s more, the fund estimates the fair share price of its holdings at 835p compared to the current share price of 697p. That’s around a 16% discount on the equity the fund holds if the estimate is correct.
One problem here is that around 30% of holdings are unlisted and therefore hard to assess.
That can be good as I can get exposure to exciting companies like SpaceX – one of Scottish Mortgage’s private investments. But it does mean I might not be getting fair value as the equity may be worth less than the valuation that Scotish Mortgage gives it.
Is Scottish Mortgage a buy?
All in all, though, the good outweighs the bad here for me. And when I consider the low fees the fund charges for managing the holdings – only 0.32% – I’m happy to hold onto the shares I have.
And looking towards the future and a potential AI revolution, I may snap up a few more shares soon at its current cheap price.
