Here’s one exciting alternative to Scottish Mortgage shares

Investors considering Scottish Mortgage shares may want to consider this peer. Also operated by Baillie Gifford, it offers an even more aggressive growth strategy.

| 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.

Young black man looking at phone while on the London Overground

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 an excellent way to gain exposure to growth-oriented companies. The trust is diversified and its managers have an excellent track record of picking the next big winner. Of course, given the fact that it’s investing in growth-focused companies, it can be quite volatile, but the long-term returns have been very impressive. It’s up around 340% over 10 years and 2,665% since 1993.

So, what’s the exciting alternative to think about? Well, it’s another Baillie Gifford-managed trust. And it’s called Edinburgh Worldwide Investment Trust (LSE:EWI). This global investment trust typically focuses on smaller and entrepreneurial companies. Management’s previous policy was to make the first investment in these companies when their market value was under $5bn. But that was recently upped to $25bn to provide more opportunities.

Created with Highcharts 11.4.3Edinburgh Worldwide Investment Trust Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

What does it invest in?

The Edinburgh Worldwide portfolio contains a blend of listed and unlisted holdings, with its top two positions — SpaceX (12.3%) and PsiQuantum (7.5%) — comprising nearly 20% of total assets. While these innovative private companies present significant growth potential. their lack of financial transparency — only listed companies need to publish earnings — and presumed pre-profit nature adds a layer of risk.

The remainder of the top 10 includes holdings in sectors like biotechnology (Alnylam Pharmaceuticals, Exact Sciences, Oxford Nanopore), technology (Zillow, Doximity), and defense (Axon Enterprise, AeroVironment). Together, the top 10 positions represent 42.8% of the portfolio. This means its investments are more concentrated than Scottish Mortgage. This mix could offer outsized returns but requires an appetite for higher risk and volatility.

I also appreciate that none of these companies are household names, perhaps with the exception of SpaceX. This reinforces the risk/reward nature of the trust. These are high-potential companies, which may become the household names of tomorrow. By comparison, Scottish Mortgage’s top holdings also include well-known companies like Nvidia, Amazon, Tesla, and even Ferrari. It’s also worth noting that SpaceX is Scottish Mortgage’s largest holding as well.

Diversification is still key

Baillie Gifford has an excellent track record and its trusts are some of the most popular in the UK. Moreover, Edinburgh Worldwide shares are currently trading at a 7.1% discount to the net asset value (NAV) of the trust. The NAV is the reported value of all the the fund’s holdings. As such, a discount is highly attractive.

However, Edinburgh Worldwide’s high-risk, high-reward profile may make it unsuitable as a sole investment, but it could be a valuable addition to a cautious portfolio. Its focus on innovative, growth-oriented companies offers diversification and the potential for outsized returns.

Moreover, investors should also consider their time horizon. Edinburgh Worldwide will likely demonstrate more volatility than Scottish Mortgage. The long-run trajectory may be upwards, but the could be lots of bumps on the way.

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.

James Fox has positions in Edinburgh Worldwide Investment Trust, and Scottish Mortgage Investment Trust Plc. The Motley Fool UK has recommended Axon Enterprise and Doximity. 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 »