It’s not hard to imagine why an investor would have put a big lump sum into Scottish Mortgage (LSE: SMT) shares one month ago. They were flying.
The FTSE 100-listed investment trust, which is heavily focused on disruptive US tech, both quoted and unquoted, was up 42% in a year, trading at 1,108p.
It was a big beneficiary of the so-called ‘Trump bump’ in November, when investors anticipated that Donald Trump’s ‘America First’ policy and planned corporate tax cuts would drive Wall Street to fresh highs.
Unfortunately for our Scottish Mortgage investor, the mood has shifted over the last month, as investors fret over the impact of Trump’s trade tariffs instead. The Scottish Mortgage share price has slumped almost 10% in a month to around 1,100p.
Can this FTSE 100 stock fight back?
If our momentum-chasing investor had put £10,000 into the stock, they’d have just £9,000 today. So it goes.
The Scottish Mortgage share price is notoriously volatile. It crashed by half in 2022, during that year’s tech sell-off. But despite the recent dip it’s still up 75% over five years and 25% over the last 12 months.
Here’s a thought. Does anybody actually remember the 2022 tech slump? In retrospect, it was a brilliant time to buy. A crash usually is, for investors who take a long-term view.
So is the current Scottish Mortgage dip also a buying opportunity? Not for me. But that’s because I already have a big stake in the stock. My strategy now is simple. Hold. Forget. Believe.
Investors who also believe in Scottish Mortgage, but don’t hold it, should consider taking advantage of today’s reduced price.
An exciting but risky growth stock
I was concerned whether performance could survive the departure of inspirational manager James Anderson in April 2022. He ran the fund for more than two decades, turning it into the giant we know today. Lead manager Tom Slater seems to be making a good fist of the succession.
Yet there are risks. The trust is US tech heavy, with Amazon, Meta Platforms and Nvidia all in the top 10 holdings. So was Tesla, until the recent sell-off.
There’s a danger Trump triggers a backlash against big tech. Elon Musk’s MAGA associations risk hurting Tesla’s Image among those who don’t share his views.
Investor should also consider their view on Musk’s privately-held Space Exploration Technologies. It’s now Scottish Mortgage’s biggest holding, making up 7.1% of the fund. This is a brilliant way of getting access to a huge unlisted opportunity. Again, it’s risky. The Musk trade – like the Trump trade – could go either way.
So where will Scottish Mortgage shares go over the next month? The only honest answer is – anywhere. All I know is that it’s 10% cheaper than a month ago. Which is a nice discount.
Investor should only consider buying with a very long-term view. Like the 2022 crash, today’s troubles will eventually be forgotten. Investors will be worrying about other stuff instead. I aim to hold throughout.
