The Scottish Mortgage Investment Trust (LSE: SMT) share price has risen to £10 again in recent days. This means it’s up nearly 50% over the past two years, and 23% since early April.
Here, I want to look at what might have fuelled the recent turnaround, and whether it could continue.
Rising share prices
Scottish Mortgage’s focus on disruptive companies more often than not leads it to the tech-packed US stock market, particularly the Nasdaq. Around 61% of the FTSE 100 investment trust‘s portfolio is in US stocks.
Therefore, a recovery in share prices across the pond has underpinned Scottish Mortgage’s short-term performance. The Nasdaq is now 28% higher than its April trough.
That said, there have also been some notable jumps in a few key holdings. Latin American e-commerce giant MercadoLibre hit an all-time high in early June, as did audio streaming platform Spotify.
Indeed, Spotify stock is now up 805% since the start of 2023!
While the trust has been selling some Nvidia shares recently, it’s still a significant holding (around 2.3% of the portfolio). And the AI chip king has also been on a hot streak, surging 51% since the April sell-off.
It should also be noted that the FTSE 100 itself is now just a whisker away from a 52-week high — and therefore a new record.
Fintech stocks
One key theme that Scottish Mortgage has invested in heavily is the digitalisation of global finance. It has called this one of “the world’s most transformative trends“.
Key holdings here include MercadoLibre and Nu Holdings (Nubank) in Latin America, Affirm and Stripe (unlisted) in the US, and Sea Limited and Ant Group (unlisted) in Asia. Sea is up 61% this year, while Affirm has rebounded 62% since early April.
Somewhat rarely for the trust, it does have a couple of UK-based fintechs in the portfolio. These are money transfer app Wise and neobank Revolut, which is private.
The Wise share price jumped close to a record high this week after the firm posted strong annual results. Wise also said it intends to transfer its primary listing to the US, which will allow it to work towards inclusion in major US indexes.
Can Scottish Mortgage keep rising?
Whether the trust keeps rising in the near term is largely dependant on what the US market does. We know Trump’s tariffs are hurting the global economy, so this is a risk to American corporate earnings and the value of Scottish Mortgage’s portfolio.
Investors in the trust need to be prepared to ride out sometimes stomach-churning periods of volatility.
On the flip side, the global IPO market is warming back up again (though not in London, unfortunately). Revolut is reportedly preparing for a public listing that could value the company at over $45bn, while Ant Group might list in Hong Kong later this year.
These massive IPOs could help boost Scottish Mortgage’s net asset value (NAV), assuming they’re well-received by investors. It would also help relieve worries about the true value of its unlisted assets.
Either way though, I still think Scottish Mortgage shares are worth considering. They’re currently trading at an 10.8% discount to NAV, which I think is attractive given the long-term growth potential of the portfolio.
