It seems like just yesterday that the Scottish Mortgage (LSE: SMT) share price rose a magnificent 105% in a year. However, that was all the way back in 2020. The pandemic saw trillions wiped off stock markets across the globe. Yet Baillie Gifford’s flagship fund managed to buck the trend.
The journey since then, however, has been less glamorous. The trust fell sharply towards the end of 2022 as inflation took its toll. It provided a glimmer of hope last year, rising by nearly 10%. However, it’s still some way off its all-time high of over £15.
So, will 2024 be the year it returns to its former glory?
A rocky road
In all honesty, I’m not too confident that it will be. That’s largely due to its heavy weighting to growth stocks. These types of investments tend to be volatile. And with interest rates high, these sorts of companies tend to be out of favour. That’s due to the fact these firms tend to be leveraged with high levels of debt. With higher rates, this debt becomes more difficult to service. As a result, investors tend to steer clear, instead opting for safer alternatives.
The UK base rate currently sits at 5.25%. It’s expected to come down this year, but only to around 4%-4.25%. With this, investors may continue to remain cautious when it comes to investing in Scottish Mortgage.
Value to be had
But that’s not to say I’m shunning Scottish Mortgage. In fact, I’m rather tempted to snap up some shares while they’re still cheap.
As I write, the trust is trading at a 12.8% discount to its net asset value. What this implies is that I’m able to purchase the companies it owns for a rate cheaper than their market value. This means every 87.2p I invest is worth £1. I love a bargain, so that’s a deal I’m liking the look of.
To add to that, investing in Scottish Mortgage provides me with exposure to 99 companies under a single investment. What’s more, I gain access to unlisted shares that I couldn’t access as a retail investor. The most exciting of these is Elon Musk’s SpaceX.
There are a few other reasons I like the look of the stock. One is the approach it takes. Manager Tom Slater and deputy Lawrence Burns invest for the long run, with their aim to find “the world’s most exceptional growth companies” and hold them for the years ahead. This is easier said than done. But with the trust picking up Tesla for just $6 over a decade ago, it’s proved it’s capable.
It also has a large focus on China. While this may provide issues in the times ahead, I’m confident in the long run it’ll prove to be a smart move.
A revival?
So, will 2024 see Scottish Mortgage edge closer to its 2021 levels?
I’m not sure. I think we could see a slow revival in its share price. However, I can’t see it reaching the £15 mark in the next year.
Nevertheless, that doesn’t deter me from buying any shares. It’s the opposite. If I had the spare cash, I’d be looking to add the trust to my portfolio.
