£5,000 invested in Scottish Mortgage shares 6 months ago is now worth…

Scottish Mortgages shares have risen with the resurgent technology sector, driven by supportive trends in artificial intelligence. So what’s next?

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Scottish Mortgage Investment Trust (LSE:SMT) shares are a favourite with UK investors looking to gain exposure to the fast-moving technology sector. The trust’s shares are known to be fairly volatile — for a trust — but the long-term performance has been excellent.

So what’s happened over the past six months? Well, the FTSE 100 stock’s actually up 25.5%. This means £5,000 invested just six months ago would now be worth a little over £6,250. That’s a very good return for an investment trust.

What’s led the shares higher?

The Scottish Mortgage share price reflects the value of the company’s holdings — this is typically referred to as the net asset value (NAV). And as we can see from the below graph, Scottish Mortgage’s NAV has surged since August/September.

Source: Hargreaves Lansdown

This is likely driven by the broad appreciation of its holdings, but it’s possible to identify a few key drivers. One of which is likely to be SpaceX. The Elon Musk company now represents 7.5% of the Scottish Mortgage portfolio, and is the largest single holding. In June 2024, the privately-held space exploration business was valued at $240bn. In December 2024, that figure was reported to be $350bn.

While this is definitely not the only reason the NAV’s pushed higher, it’s certainly a strong contributing factor. Other major holdings including Meta and Tesla have performed well. As the graph shows, the share price — indicated by the blue line — has increased broadly in line with the NAV, while maintaining a discount to the NAV.

Overvalued or undervalued?

Of course, the fact that the shares trade at a discount to the NAV suggests that the stock is undervalued. However, it’s not quite so simple. The NAV reflects the market value of these stocks and unlisted companies. And investors may simply disagree with these valuations.

It’s certainly the case that some valuations within the tech sector are getting a bit frothy. Tesla, for example, is trading at 135 times forward earnings, and has a price-to-earnings-to-growth (PEG) ratio of 13.2. Obviously, some investors will point to Musk’s very long-term strategy in robotics and autonomy, but others won’t touch the stock with a bargepole.

I’m no different. I look through the portfolio and see stocks I think are overvalued, and some others undervalued.

It’s the track record

Despite holding Scottish Mortgage shares, I’ll admit that some of the valuations of the largest holdings aren’t attractive. I’d add that the presence of unlisted stocks also adds a degree of danger. However, the trust’s management has a great track record of picking the next big winners. While big tech will remain a large part of the portfolio, I’d expect to see some of the smaller holders drive the portfolio in the coming years.

Personally, I’ve continued to top up my holdings in Scottish Mortgage at regular intervals. I may consider buying more soon.

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.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. James Fox has positions in Scottish Mortgage Investment Trust Plc. The Motley Fool UK has recommended Meta Platforms 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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