Why the Scottish Mortgage share price is up 11% in November

Ben McPoland takes a look at some developments that have pushed the Scottish Mortgage share price up in double-digits this month.

| More on:
Arrow symbol glowing amid black arrow symbols on black background.

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.

It’s been a solid month so far for the Scottish Mortgage Investment Trust (LSE: SMT) share price. As I write, it has risen 11.8% to reach 718p.

However, that’ll be cold comfort for those who invested at 1,500p two years ago. Scottish Mortgage shares are still down about 52% from that point.

What happened

The share price shot up on 1 November when the US Federal Reserve announced that it was holding interest rates steady. This was the second consecutive time it kept its benchmark interest rate steady.

A further boost came with the publication of US consumer price data on 14 November. This showed that inflation fell more than expected in October, sending US stocks rising across the board.

While Scottish Mortgage invests globally, over half of the portfolio is in US stocks (53.5%). For better or worse, what happens stateside has a big impact on the share price.

That said, the Bank of England’s decision on 2 November to also keep the base interest rate steady (at 5.25%) would have boosted investor sentiment.

Strong top holdings

The FTSE 100 trust runs a concentrated portfolio, with its largest 10 holdings accounting for around 45% of total assets.

The top four stocks, which make up around 22% in total, have all risen sharply so far in November.

% gain (since 1 November)
ASML +14.5%
Nvidia +20.5%
Amazon +9%

The standout performer has been Nvidia (NASDAQ: NVDA). The stock has surged an incredible 245% this year after the company reported enormous demand for its artificial intelligence chips.

To put this demand in context, Nvidia posted revenue of $5.9bn in Q3 last year. In Q3 this year (due to be announced on 21 November), it’s expected to report $16bn. Its earnings per share (EPS) is estimated to grow by over 450% to $3.39.

Yet Nvidia’s outlook could be negatively affected by the US government’s latest restrictions on the export of powerful chips to Chinese customers.

Already, Baidu has announced a new deal to source chips from Huawei. So this issue has the potential to become something of a headwind for the Nvidia share price.

Source: Baillie Gifford

Portfolio strugglers

We’re now seeing the strain of higher interest rates and a tough macroeconomic environment on some of the trust’s smaller investments.

For example, trucking software firm Convoy went bust in October. This was despite the unlisted start-up being valued at $3.8bn only last year. It announced that “a massive freight recession and a contraction in the capital markets” had prevented it from being acquired by anyone.

Another holding, ChargePoint, appears to be in crisis. The electric vehicle charging firm just slashed its Q3 revenue forecast and both its CEO and CFO immediately stepped down. The holding has fallen 82% in one year.

Other portfolio disappointments can’t be ruled out.

On a more positive note, SpaceX got the most powerful rocket ever built (Starship) to space on 18 November. Unfortunately, it self-destructed shortly afterwards, but this is widely seen as a step forward for the future of space transportation.

Ultimately, it’ll be the future progress (or not) of large holdings like SpaceX that determine how Scottish Mortgage shares perform. On these, I remain very optimistic as a long-term shareholder.

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.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ben McPoland has positions in ASML, MercadoLibre, Nvidia, and Scottish Mortgage Investment Trust Plc. The Motley Fool UK has recommended ASML, Amazon, MercadoLibre, and Nvidia. 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

Close-up of British bank notes
Investing Articles

11% dividend yield! 1 FTSE 100 income stock to buy today?

I’m hunting for high dividend yields in the FTSE 100, and this financial institution currently offers the highest payout. Is…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

Should we buy more FTSE 100 shares in December? The stats seem to say yes

The different months of the year should have no effect on where the FTSE 100 goes, should they? The evidence…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

8% yield! Here are the dividend forecasts for Barclays shares for 2024 and 2025

This FTSE 100 bank offers one of the biggest yield on the UK's blue-chip share index. But is it too…

Read more »

Young woman holding up three fingers
Investing Articles

3 reasons why Lloyds’ share price could surge through £1 in 2024!

Optimistic UK investors are buying Lloyds in the hope of a sharp share price rebound. Could the company be a…

Read more »

smiling couple holding champagne glasses and looking at camera at home with christmas tree
Dividend Shares

2 discounted high-dividend stocks on my Christmas list!

These top dividend stocks are already in the Christmas sales! I'm hoping to buy them to make a solid second…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

I’m eyeing these two cheap dividend shares for 2024!

This Fool likes dividend shares as a play for 2024. Here, he identifies two that look cheap and explains why…

Read more »

Investing Articles

This FTSE 250 growth machine is top of my list of stocks to watch in 2024

Despite a 13% fall, Games Workshop shares trade at a P/E ratio of 22. Stephen Wright plans to keep a…

Read more »

Investing Articles

The Tesla share price is a bargain to me

A lot of people think the Tesla share price is overvalued. Oliver Rodzianko disagrees. He tells us why he’s piling…

Read more »