Here’s why I think the Scottish Mortgage share price can climb higher

The Scottish Mortgage share price is gaining in 2024. But it still lags the Nasdaq and trades at a tasty discount to its net asset value.

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The Scottish Mortgage Investment Trust (LSE: SMT) share price has climbed close to 20% so far in 2024.

But looking back at the past five years, I think I’m seeing an underperformance, and I reckon there could be a lot more still to come.

Lagging the Nasdaq

The high-profile stars held by this investment trust include some of the biggest winners on the Nasdaq tech stock index.

From a baseline in mid-2019, the Scottish Mortgage share price climbed 190% by the time of its October 2021 peak. And that was almost twice the Nasdaq’s gain in the same period.

The two then fell and were almost completely back in line for most of 2022. But since then, tech stocks have been heading up again.

But this time round, it’s the Nasdaq that’s pulled ahead. It’s now up 123% over the full five years, close to twice the Scottish Mortgage growth of 68%.

Catch-up time?

Does that mean the trust’s undervalued compared to the Nasdaq? In itself, no. But it’s one thing that adds to the total.

The discount to net asset value (NAV) is another. Currently at 9%, that means we can buy a pound’s worth of underlying assets for 91p.

The discount has been higher, up around 20%. But the trust traded at a premium back in 2021, costing 4% more than the stocks it held.

I don’t expect to see a premium again any time soon. But the share price and the NAV are converging, and I think the discount could shrink more.

New growth phase?

In general, investors tend to pull back to safer stocks during hard times and cash is tight. Just like the last few years, with the pandemic and then high inflation and interest rates.

And when things lighten up, we’re more open to a bit more risk and start to eye up growth stocks again.

Now, I would never suggest trying to time a strategy. Safety, income, growth… depending on market conditions. No, I’ve always thought we need to choose our strategy carefully, and stick with what we know.

But for those with a long-term growth plan, I feel we could be in a buying opportunity here.

Want some of these?

It’s all down to whether we want to own a bit of Tesla. Or Moderna, or Or, what’s that one that’s been in the news a bit lately? That’s it, Nvidia, now valued at more than $3trn.

I don’t want to put much money onto any one of those individually. Or, in fact, any of the many other tech and growth stocks held by Scottish Mortgage.

Any one of them could crash spectacularly, and I don’t want to be left standing in the ruins.

Spread the risk

But a little bit of cash in each one, spread across other global growth stocks too, with a whole lot of diversification? I might go for that.

I still expect Scottish Mortgage to suffer more falls in the years to come. But for those who see a long-term future for the stocks it holds, it has to be worth considering, doesn’t it?

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. Alan Oscroft has positions in Scottish Mortgage Investment Trust Plc. The Motley Fool UK has recommended Amazon, 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.

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