Scottish Mortgage Investment Trust (LSE:SMT) is one of just a few funds listed on the FTSE 100, and it’s one of the few stocks I can see myself holding for a very, very, very long time.
So, why is this?
Fund flexibility
Obviously, as an investment trust Scottish Mortgage is inherently more flexible than a housebuilder like Vistry or a bank like Lloyds. The company invests in range of companies across growth-oriented sectors. And it has the capacity to change direction depending on market conditions and emerging opportunities.
Since its inception, the trust has proven very adept at investing in other companies’ success. It’s picked many of today’s big winners before most of us had even heard of them.
It also has a flexible mandate. It’s permitted to invest in a range of public and private companies across different sectors, geographies, and company sizes.
Simply, it adjusts its positioning based on its view of long-term growth trends.
And this makes it easier for me to say I’m taking a ‘forever position’. Investments like Vistry or Lloyds aren’t as flexible as a trust, even though I like both of these stocks.
Exposure to growth from the UK
One thing that’s particularly attractive about Scottish Mortgage is the ability to invest in stocks that are predominantly listed in dollars.
Investing directly in US-listed companies like Nvidia (which is Scottish Mortgage’s largest holding) typically means I would incur platform and foreign exchange charges. On some platforms, like Hargreaves Lansdown, this is really quite expensive.
So, it’s great to invest in these companies without these FX charges. What’s more, Scottish Mortgage doesn’t display the same exchange rate volatility that I could incur when investing in a single US stock.
Exchange rates make a difference, because the net asset value (NAV) of the trust’s holdings are impacted by currency fluctuations. But it’s not as pronounced as when we make single investments in stocks that are denominated in non-UK currencies.
A winning portfolio
There’s no guarantee that Scottish Mortgage’s portfolio will continue to outperform the market. But over the last decade, the fund managers have picked a winning portfolio.
I admit that I’m not 100% keen on all the investments Scottish Mortgage has picked. I believe there’s no guarantee that Moderna will deliver on its pipeline of drugs. Plus Tesla stock is vastly expensive and needs to dominate the self-driving market to justify it. And Ferrari’s valuation has looked bloated for some time.
| Company | Holding |
| Nvidia | 6.8% |
| ASML | 6.5% |
| Moderna | 6% |
| Amazon | 5.7% |
| Mercadolibre | 5.3% |
| Space Exploration Technologies | 4.4% |
| Tesla | 4.1% |
| PDD Holdings | 3.5% |
| Ferrari | 3.1% |
| Meituan | 2.6% |
However, this is the benefit of a fund. The trust has around 50 investments. And while I may be unsure about some of these, I’m very bullish on companies like SpaceX.
I’ve held this stock for a little over a year, picking it up when the discount versus the NAV was around 20%.
Luckily for me, the stock is still ‘on sale’, trading with a discount of around 11% to the NAV. In fact, I really believe it can be a long-term winner so I recently added it to my daughter’s pension.
