This forgotten FTSE 100 gem could be the best bargain on the stock market

The FTSE 100 is full to the brim of high-quality businesses. But this Fool has his eye on this ‘forgotten’ stock. Here he explains why.

| More on:
Concept of two young professional men looking at a screen in a technological data centre

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

A lot of FTSE 100 constituents look cheap as chips right now. But one in particular stands out to me — Scottish Mortgage Investment Trust (LSE: SMT).

I feel like it’s a bit overlooked. It’s been around a very long time but after a surging price during the pandemic period from 2020, it has fallen out of the spotlight. Today, investors can snag a share of the Baillie Gifford fund for just £8.12. That’s some way off its all-time high of £15.29, which it hit in November 2021.

But I think Scottish Mortgage could be about to make a comeback. I reckon investors should consider buying some shares today at its slashed price.

Gaining momentum

While its shares still look like a steal to me, they’re not as cheap as they were a year ago. During that time, they’ve climbed 28.1%. The stock has been gaining momentum. There are a few reasons for that.

Firstly, markets are beginning to prepare for interest rate cuts. Inflation has been steadily falling over the past 12 months. While we’ve experienced a few blips recently, I’d still expect to see the base rate come down at some point this year.

On top of that, some of the trust’s largest holdings have performed extremely well over the last year. With that in mind, its share price has been given a boost.

Cheap as chips

But even so, I think the trust still looks like one of the best bargains out there today. After all, it’s trading at a 9.1% discount to its net asset value. That means I can buy high-quality names such as Moderna, Amazon,and Spotify, just a few of the 99 companies the trust holds, all for cheaper than their market rate.

Of course, over a quarter of the holdings in its portfolio are private companies. Valuations for these businesses are often difficult to pinpoint. Should they go public, their valuations could get marked down.

Exciting times ahead

But on the flip side, there’s also the potential that they rise. And with Scottish Mortgage’s successful stock-picking track record, I have faith in management’s investment decisions.

For example, it purchased shares in Tesla back in 2013, which has proved to be an incredibly fruitful investment. Scottish Mortgage first invested in Nvidia back in June 2016. Since then, the stock has risen a whopping 6,497.4%.

The trust has a heavy focus on artificial intelligence (AI) and that excites me. The AI industry is currently worth around $200bn but that’s expected to rise to over $1.8trn by 2030. That’s a massive market I believe Scottish Mortgage can tap into.

Suits me to a tee

This sort of investment strategy can be very risky though. Investing in growth stocks doesn’t always pay off and I’m expecting bouts of volatility when investing in this one.

But as someone with a multi-decade investment horizon and high tolerance to risk, the trust’s strategy suits me very well.

If I had investable cash today, I’d be rushing to snap up some Scottish Mortgage shares.

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. Charlie Keough has positions in Nvidia. The Motley Fool UK has recommended Amazon, Nvidia, Shopify, and 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.

More on Investing Articles

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Revealed! One of the hottest growth, value, and dividend shares to buy today

This high-dividend, low-cost company is also one of the London stock market's most exciting growth shares, writes Royston Wild.

Read more »

Investing Articles

£20,000 in savings? Here’s how I’d target a £2,219 monthly passive income with FTSE 100 shares

Investing in FTSE 100 shares can be a great way to turn a regular investment into a life-changing passive income…

Read more »

Investing Articles

These are the most popular 2024 Stocks and Shares ISA picks so far

After a few tough years, it looks like the 2024 Stocks and Shares ISA season is getting off to a…

Read more »

Investing Articles

This FTSE 100 ETF may be the simplest way to become a stock market millionaire

Ben McPoland considers one very straightforward stock market investing strategy that could lead to a million-pound portfolio.

Read more »

Investing Articles

I’d buy 11,220 Legal & General shares for £200 a month in passive income

Our writer considers how much money investors would have to put into Legal & General (LON:LGEN) shares to target £2,400…

Read more »

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

These 2 magnificent FTSE 250 shares are on sale right now!

These FTSE 250 companies still look cheap, despite recent share price gains. Here's why our writer Royston Wild thinks they’re…

Read more »

Blue NIO sports car in Oslo showroom
Growth Shares

Down 36% in 2024, how low could NIO shares go?

The electric vehicle sector has seen some tremendous volatility in recent years, but what does the future hold for NIO…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

£5,000 in savings? Here is how I would invest in income shares

This Fool has been searching for ways to generate a passive return via income shares.

Read more »