After rising 27%, is there still value left in Scottish Mortgage shares?

Scottish Mortgage shares have been on a tear. This Fool had been planning on snapping up some shares, but is it still worth it?

| More on:
Young Asian man drinking coffee at home and looking at his phone

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.

Like many UK-listed stocks, Scottish Mortgage Investment Trust (LSE: SMT) shares have had an awesome start to the year. During 2024, its share price has shot up 11% as investors begin to regain confidence in the market after an incredibly dire couple of years.

That now means the Baillie Gifford flagship fund is up 27.1% in the last 12 months. And while that’s all well and good, I’m curious about one thing.

Does this mean that investors, like me, considering buying some shares today have missed the boat? I want to take a closer look at it there’s any value left to extract out of Scottish Mortgage.

Any value left?

When it comes to valuing shares, there are a host of methods that investors can use. The price-to-earnings ratio is one of the most common. However, for funds, looking at whether it’s trading at a premium or discount its net asset value (NAV) is highly effective.

Scottish Mortgage is currently trading at a 7.9% discount to its NAV. That looks cheap and means in theory I can buy the companies the trust holds for lower than their market rate.

Painting the full picture

However, that doesn’t paint the full picture. That’s because, of its 99 holdings, over 25% are private companies not listed on an exchange. Valuing these businesses can often be challenging. Should they go public, their share price could fall.

That feeds more widely into one of the risks with investing in the trust. Its focus is on owning growth stocks and with that comes the potential for large amounts of volatility.

Furthermore, growth stocks struggle in high interest rate environments given they often have large amounts of debt. Therefore, any signs of a delay in rate cuts could send the share price tumbling.

A strong track record

Of course, on the flip side, there’s also the possibility that unlisted companies could soar should they list. And there’s certainly the potential for that to happen with exciting companies such as Elon Musk’s SpaceX, which the trust holds.

That’s why I’m a fan of Scottish Mortgage. By owning it, I gain access to investment opportunities I couldn’t otherwise have as a retail investor.

Coupled with this, management has an impressive track record of finding unearthed growth stocks before the rest of the market does. It invested in Tesla in 2013. Back then, investors could pick up a share in the now industry-leading company for just $6 a pop. More recently, Scottish Mortgage snapped up shares in chipmaker Nvidia before the wider market piled into the stock.

Past performance is by no means an indication of future returns. But Scottish Mortgage says it sets out to own “the world’s most exceptional public and private growth companies” to generate long-term returns. It has proved over the last decade that it’s more than capable of doing that.

Still growing room

Considering that, I reckon there’s still value in Scottish Mortgage shares. While the trust’s growth in recent months has been impressive, it’s still down 42.8% from its all-time high, which it reached in November 2021.

I’ve had it on my buy list for a long time now. I’ll have some spare cash this month. I’ll be adding it to my portfolio.

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.

Charlie Keough has positions in Nvidia. The Motley Fool UK has recommended Nvidia 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

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Buying 8,617 Legal & General shares would give me a stunning income of £1,840 a year

Legal & General shares offer one of the highest dividend yields on the entire FTSE 100. Harvey Jones wants to…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

£25k to invest? Here’s how I’d try to turn that into a second income of £12,578 a year!

If Harvey Jones had a lump sum to invest today he'd go flat out buying top FTSE 100 second income…

Read more »

Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine
Investing Articles

2 lesser-known dividend stocks to consider this summer

Summer is here and global markets could be heading for a period of subdued trading. But our writer thinks there…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Here’s how I’d aim to build a £50K SIPP into a £250K retirement fund

Our writer outlines the approach he would take to try and increase the value of his SIPP multiple times in…

Read more »

Investing Articles

9.4%+ yields! 3 proven FTSE 100 dividend payers I’d buy for my Stocks and Shares ISA

Our writer highlights a trio of FTSE 100 shares with yields close to 10%. He'd happily pop them into his…

Read more »

Mixed-race female couple enjoying themselves on a walk
Investing Articles

Are Raspberry Pi shares a once-in-a-lifetime chance to get rich?

With Raspberry Pi shares surging after a successful IPO, could this UK tech startup offer a long-term wealth creation opportunity…

Read more »

Newspaper and direction sign with investment options
Investing Articles

Huge gains and 9% yields: why now’s an amazing time to be a stock market investor

The stock market’s generating fantastic returns in 2024. Whether you're looking for gains or income, it’s a great time to…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

This steady dividend payer looks like one of the best bargain stocks in the FTSE 100

A yield of 4.7% and a consistent dividend record make this FTSE 100 company look like good value in an…

Read more »