I reckon Scottish Mortgage shares could be one of the best bargains on the FTSE 100!

Scottish Mortgage shares are warming up, but this Fool still thinks they look like great value. He’s keen to add them to his portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Smiling white woman holding iPhone with Airpods in ear

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.

Scottish Mortgage Investment Trust (LSE: SMT) shares are currently 41.5% cheaper than their all-time high. That looks like an absolute steal, and I plan to capitalise on it.

The trust rose to prominence in 2020 when stock markets across the globe nosedived. Not Scottish Mortgage though. It bucked the trend, rising over 100% during the year.

But since then its share price has retreated. Today, at £8.95, it looks like great value compared to the £15.28 heights we’ve seen it hit before.

I’ve been scouring the FTSE 100 and Scottish Mortgage shares might just be one of the best bargains out there right now.

Gaining momentum

That being said, shares in the Baillie Gifford fund aren’t as cheap as they have been. This year, the stock’s been gaining momentum. It’s up a healthy 13.5%, beating the Footsie’s return of 6.8%. In the last 12 months, it’s climbed 30.2%. That may worry some investors who are seeking value.

Of course, I want to try and buy stocks when they’re at their lowest. That way, I can make bigger returns over the long run. But even with its rise, I think Scottish Mortgage has some growing room left.

Created with Highcharts 11.4.3Scottish Mortgage Investment Trust Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Scottish Mortgage still looks like great value today. It’s trading at an 8% discount to its net asset value. That, in theory, means I can get access to the companies that the trust holds for cheaper than their market rate.

Risk profile

But there’s a certain level of risk when investing in Scottish Mortgage. First, it owns unlisted companies. Valuations for these companies are sometimes difficult to pin down.

It also has a heavy weighting to growth stocks, and these can be extremely volatile. Investors often have high expectations for their earnings potentials, so if they fail to achieve forecast earnings their share price can plummet.

They can generate incredibly impressive returns, such as Nvidia has for the trust. But investors should also be wary that they can’t all be as successful as the chipmaker. That’s the risk with investing in less established companies and, as such, Scottish Mortgage.

Interest rates

There’s another reason I’m bullish on the trust. When interest rate cuts come, I reckon we could continue to see its share price trending upwards.

Growth stocks don’t fare well in high rate environments. They’re leveraged with debt and paying this off becomes more of a challenge when rates are as high as they’ve been. During times like this, investors tend to revert to saver investments rather than risky growth stocks, such as bonds.

But cuts should see investors’ appetite for owning growth shares pick up again. Scottish Mortgage will be a direct beneficiary of this. That said, any delay in cuts could impact the trust.

Getting in now

I’m keen to rush in and snap up some shares now. If I have the cash over the next few weeks, that’s exactly what I’ll be doing.

Its share price has been gaining pace this year and I reckon we could see it continue with this in the months to come. I want to make the most of its current price while it still looks like one of the best bargains on the Footsie.

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. 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

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »