The BP (LSE:BP) share price has already risen 40% in the last 12 months. This is a dramatic outperformance of the 4.7% increase that the FTSE 100 has seen in the same period. Rising energy prices have boosted the company’s profit margins and made it one of 2022’s top-performing shares.

Tuesday gave BP shares something more to cheer about as the energy giant released its highest quarterly results for 14 years. Does this put the BP share price in a good place to continue its strong performance?

Strong second-quarter results

BP announced underlying earnings of $8.5bn in the second quarter of 2022 — a 200% increase from the $2.8bn reported for 2021’s Q2. The group thanked strong refining margins and exceptional oil trading performance for the strong set of figures. 

Alongside the soaring earnings, it announced some other positive news. The company was able to reduce net debt for the ninth successive quarter to $22.8bn. It was also able to complete its $2.5bn share buyback programme in the period. The BP share price was up just under 3% on the back of Tuesday’s earnings.

The results came after a record-breaking week of earnings for large oil and gas companies. Shell announced its biggest-ever profit of $11.5bn while Chevron and ExxonMobil also reported soaring earnings. All three share prices rose on the news last week. 

Possible higher taxes

The incredible growth in earnings in the energy sector may lead to future challenges. Governments may be encouraged to raise taxes on the sector to help fund aid for people in the cost-of-living crisis.

The UK has already announced a windfall tax of 25% on oil and gas companies operating in the North Sea. BP announced that this has dramatically increased its tax bill in the UK this year. If a similar tax was to be introduced in other countries, future profits would be considerably dented. This is something I would have to keep an eye on if I took a position in BP.

The shift towards renewables

BP has been aiming to safeguard its future in a greener economy through a series of renewable energy investments. It recently announced a 40% stake in an Australian renewables project where it hopes to develop 26GW of solar and wind power. The company has also sold its stake in a Canadian oil sand project, which is notorious for high levels of pollution.

This shift towards renewable energy is vital if the BP share price wants to see strong performance for decades to come. However, the group will be cautious not to shift away from currently higher profitable hydrocarbons too quickly.

Overall, I believe that BP shares are positioned fairly well for the next couple of years. Fuel prices are remaining high and the company has made encouraging debt reductions and share buybacks. While possible tax rises would harm profits, I believe the BP share price will continue to see steady growth. As a result, I’d be adding BP shares to my portfolio were it not for the fact that I’m trying to reduce my exposure to carbon-intensive industries.

The post Will the BP share price continue to soar after strong Q2 earnings? appeared first on The Motley Fool UK.

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Finlay Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Stock markets are continuing their volatile trend throughout 2022. I’m looking to reduce my exposure to unpredictable price changes by boosting my passive income. These two UK dividend shares offer impressive yields and strong underlying fundamentals.

Legal & General

Legal & General (LSE:LGEN) shares have been on a downwards trend in 2022. Shares are down 15% year-to-date as stock markets have slid. As dividend yields are dependent on the share price, this slash in value has made the company even more appealing to me. The dividend yield has now risen to around 7%.

Alongside all of this, I consider L&G to be in a strong position to maintain dividend payments over the forthcoming years. Currently, a comfortable 54% of total earnings are paid out to shareholders. With 46% of earnings going back into the operating of the business, this shows that the company is not overstretching any finances to pay shareholders.

The financial services giant reported profits of £2.05bn for 2021, which was an increase of 28% from the year before. This record profit has put L&G shares trading with a price-to-earnings ratio of 7.6. This is considerably less than the average FTSE 100 P/E ratio of 15.

Despite this, some risks need to be considered. Legal & General has over £1trn in assets under management making it one of the UK’s leading investors. As shares have had a rough start to the year, customers will likely start withdrawing their investments, which will harm future profits for the company.

A FTSE 100 bank

Barclays (LSE:BARC) is another FTSE 100 dividend share that has had a rough start to the year. Barclays shares are down nearly 20% in 2022. This has pushed the dividend yield up to 5% with this expected to rise even further in coming years. Forecasts suggest that the dividend yield will rise to 6.5% by 2024.

Barclays only pays out 17% of total earnings to shareholders. This shows that, while the company is committed to delivering a dividend, it will not sacrifice the strength of the company to provide unsustainable payouts to shareholders.

Back in Q1, Barclays reported a rise in earnings of 10% to £6.5bn which was led by an impressive performance from the corporate and investment bank division. Alongside this, strong 2021 results have left Barclays with a P/E ratio of just 4.5, which is incredibly low.

There are some concerns about the future that I am acknowledging. If the economy is pushed into a recession, there will likely be an increase in debt defaults which will increase costs rapidly. Demand for the bank’s investment services will also fall as clients shift away from high market exposure.

Overall, both these dividend shares face several challenges in the upcoming year. However, I believe that they remain in a good position to pay out a consistent dividend and tackle forthcoming uncertainty. As a result, with my next chunk of savings, I am adding to my existing position in Legal and General and opening a new one in Barclays.

The post 2 UK dividend shares I’m buying to hold through volatile times! appeared first on The Motley Fool UK.

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Finlay Blair holds shares in Legal and General Group PLC. The Motley Fool UK has recommended Barclays. 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.

With the FTSE 100 index down 5% in 2022, it is a challenge to find shares that are in the green this year. However, the BT (LSE:BT.A) share price is a rare exception with it up over 10% this year. I question if this growth looks set to continue and whether its shares merit a place in my portfolio.

A defensive nature

BT is positioned well to fight against the threat of inflation. It has a strong existing infrastructure position, meaning it doesn’t have to rent from third parties. Alongside this, as the working world has been shifted increasingly online, broadband access is becoming a necessity for the UK population. This will allow the company to retain customers even as inflation climbs. This defensive nature has allowed the BT share price to be relatively unaffected by the threat of inflation.

In addition, I find the new joint venture with Warner Brothers Discovery particularly exciting. This will bring the two TV rights portfolios of both companies together to create one cohesive sporting hub. It is expected that this will encourage more customers to take out a subscription in BT Sport.

Strong fundamentals?

Despite seeing total revenues decreasing in the last year, BT has been able to increase profits through various cost-cutting measures. Profit subsequently rose 8.8% in the last year.

Despite this, I have some serious concerns about BT’s debt load. The company currently holds a hefty £22.8bn in debt. And with only £777m in cash and cash equivalents, it is not a debt sum that can be brought down easily.

With high and growing interest rates, this debt will likely become increasingly more expensive to finance. Therefore, I am expecting future cash to be funnelled towards financing activities instead of going into the hands of shareholders.

Primed for growth?

For a company that is already serving over 30 million customers worldwide, it would be easy to assume that there are limited future growth opportunities. However, the 5G rollout has provided these opportunities. This year, BT revealed that its networks cover 50% of the UK with 5G access. This is set to rise to 90% of the UK in 2028. As a result, the company has grown the number of customers connected to the 5G network by 231% in the last year.

While I am expecting this growth to slow, it is clear that there remain areas of the market that BT can still capture despite its huge existing customer size.

Overall, I believe the BT share price has room to grow over the next few years. While the high debt is a concern, I believe the company’s current customer base and successful 5G programme overshadows this concern.

This being said, I wouldn’t be buying this share expecting it to double in value to 400p. The defensive nature of this stock adds stability to my portfolio, not unprecedented growth. This stability is why I am seriously considering giving BT shares a place in my portfolio.

The post How high can the BT share price go? appeared first on The Motley Fool UK.

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Finlay Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

I’ve always used market slumps as an opportunity to buy high-quality shares at discounted prices. And this time is no different. I’ve bought these two FTSE 100 shares that I believe to be well-positioned for the future with strong fundamentals.

African telecommunications

Airtel Africa (LSE:AAF) is a telecommunications and mobile money company with 118.2m customers in 14 African countries. The company aims to connect a continent that struggles with large distances between communities and poor infrastructure.

The FTSE 100 company saw a 14.2% increase in revenue in 2021 with the three key services of voice, data, and mobile money all growing. It was noted in its recent annual report that, “Mobile and digital penetration is low and populations are young and growing fast“. This shows there remains considerable growth opportunity within the sector. The company is the market leader in the majority of the countries it operates in, which puts it in a great place to reap the rewards from this growth.

Some challenges lay ahead for this FTSE 100 company. Due to the scale of Africa, there are challenges in connecting remaining isolated areas to mobile and data networks. The costs of adding an extra person to the network will continue to rise, which will put a strain on profits.

The shares currently trade with a price-to-earnings ratio of only 9.9, which is better than the majority of FTSE 100 shares. I’m excited by the growth opportunities that lie ahead for the company, which is why I added this company to my portfolio.

A FTSE 100 engineer

Spirax-Sarco (LSE:SPX) is a British engineering giant with a global presence in several niche industries. The company manufactures steam systems, peristaltic pumps, and electric heating units. This isn’t going to get anyone’s heart racing. However, I don’t mind that. I think that ‘boring’ shares are often overlooked. The shares are down 33% in 2022.

Spirax-Sarco coped well with the pandemic with revenue only falling 4% from £1.24bn in 2019 to £1.19bn in 2020. Revenue reached £1.34bn in 2021 with the company reporting a record operating profit of £340.3m. Alongside this, 50% of revenue comes from equipment maintenance. As industrial customers can’t just decide not to maintain their equipment, this has given Spirax-Sarco a resilient income stream.

However, there are a few upcoming challenges. Lockdowns in China have left a Shanghai factory running at lower capacity, which could leave customers with longer order waits. Alongside this, rising inflation is causing its own challenges. Demand for new machinery may drop as companies try to cut down on costs.

The shares are currently trading with a price-to-earnings ratio of 34 and a dividend yield of 1.27%. I wouldn’t consider this incredible value compared to some other FTSE 100 alternatives.

Overall, I think the positives still outweigh the negatives. The company has shown incredible resilience over the last few years and I see this set to continue. That is why I added Spirax-Sarco shares to my portfolio.

The post I’ve bought these 2 FTSE 100 shares! Here’s why appeared first on The Motley Fool UK.

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Finlay Blair owns shares in Airtel Africa Plc and Spirax-Sarco. The Motley Fool UK has recommended Airtel Africa Plc. 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.

easyJet (LSE:EZJ) shares fell 3.5% yesterday on the news that Chief Operating Officer Peter Bellew was leaving the company. This news comes after months of flight disruption across Europe and with the easyJet share price already in a bad place. It’s down 55% over the last year and 70% in the last five years.

I’m now wondering whether this further shock to easyJet shares makes them an unmissable bargain for my portfolio.

Heavy turbulence

The Luton-based airline will be forced to axe around 10,000 flights over the next three months. This amounts to roughly 6% of total flights and has been caused by air traffic delays, staff shortages and ongoing strike pressures.

Why is the company struggling to get the staff it needs? After it cut jobs during the pandemic, it needs to replace them. But CEO Johan Lundgren noted that Brexit has forced the company to reject staff applications of 8,000 EU nationals. As a result, staffing shortages look to continue. This disruption has hit easyJet at the worst time with the airline industry preparing for the busiest summer since Covid.

I believe that the lack of flight certainty will harm demand over the coming few months. I myself would be reluctant to book a flight knowing there was a possibility it may never go ahead.

Will easyJet shares get back on track?

However, things are not all doom and gloom for the budget airline. Morgan Stanley believes that the cost of living crisis will force travellers to book with lower-cost airlines such as easyJet over the next year.

Alongside this, rising fuel costs are not as damaging as might have been expected. The company moved early to hedge against the cost of fuel. This means easyJet has fuel contracts at a fixed price, for now, to offset volatile price fluctuations. For the year’s second half, 71% of the airline’s fuel will cost $619 per metric tonne. This is considerably lower than the current un-hedged price of $1,225 per metric tonne. Competitors such as Wizz Air were slower to hedge against fuel costs and are paying a much higher amount.

In addition to all this, the company currently holds cash of £3.2bn, which comfortably covers debt of £2.6bn. This is good news to me as it shows that easyJet hasn’t been borrowing beyond its means throughout the pandemic.

What am I doing?

I pay attention whenever I see a share price fall over 50% in a year. In this case, I feel that things aren’t as bad as they seem on the surface. Despite all the disruption, easyJet still operates around 1,700 flights daily. Additionally, there should always be demand for low-cost flights.

However, I’m still not adding easyJet shares to my portfolio. I believe that continued flight disruption will push customers over to less affected competitors such as Ryanair. Also, the resignation of the COO at this vital time leaves the company with incomplete leadership team to tackle upcoming turbulence.

The post easyJet shares continue falling! Is now the time to buy? appeared first on The Motley Fool UK.

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Finlay Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The UK stock market has had a volatile 2022 with last month being particularly dire. However, my outlook is still optimistic. I am adding these two FTSE 100 shares to my portfolio for both July and for years to come.

An exciting property website

With 2.5bn visits each year and just under 90% market share, Rightmove (LSE:RMV) is the UK’s leading online property portal.

The share price has fallen 30% in 2022. Despite this fall in the share price, I still believe the company is positioned well enough for the future to merit a place in my portfolio.

Rightmove saw a 31.4% increase in browsing time in 2020 as COVID restrictions confined people to armchairs. Even as restrictions ease, the company continues to see an increase in listings and visits. This indicates to me that this online shift in the housing market is permanent.

The FTSE 100 share sits in a strong financial position. It is currently debt-free, which is an important attribute in an economy with rising interest rates. Alongside this, it has a hefty £48m cash position that comfortably covers all the company’s short-term liabilities.

Rightmove returned £239m to shareholders in 2021 through dividends and share buybacks. The lack of debt means cash can get funnelled back towards shareholders instead of being kept for interest payments.

However, some risks need to be considered. Interest rates are rising and mortgages are becoming more expensive. As a result, I believe the volume of houses on the market will decrease and Rightmove will see a drop in listings.

While this is a very real risk, I believe Rightmove’s dominance in a growing market is more significant. Regardless of what happens in the next year, I believe adding this share to my portfolio will deliver good returns over the next few years. That is why I’m adding this share to my portfolio with my next chunk of savings.

A FTSE 100 giant

Consumer goods company Unilever (LSE:ULVR) owns over 400 household brands worldwide. With a market position in food, beauty, and home care products, the company has a large position in several consumer sectors.

I believe that this FTSE 100 company will be able to handle the threat of inflation due to its large brand presence. Household names such as Ben & Jerries, Lynx, and Dove have been on supermarket shelves for decades and I think consumers are unlikely to shun them as the cost of living increases.

This may not be the greatest value share I could be adding to my portfolio this year. It is currently trading at a price-to-earnings ratio of 18.9, which I believe is fair but not a bargain. And a €25.5bn debt load is also a slight concern to me.

However, this investment is all about longer timeframes to me. I am confident that Unilever will retain its position in the consumer market for decades to come and I see now as the perfect time for me to get a slice of a high-quality company. As a result, I’m also adding this stock to my portfolio.

The post 2 FTSE 100 shares I’m buying for July and beyond appeared first on The Motley Fool UK.

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Finlay Blair has no position in any of the shares mentioned. The Motley Fool UK has recommended Rightmove and Unilever. 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.

The Royal Mail (LSE:RMG) share price is down over 50% in the last year. The company has been challenged with rising inflation and lower delivery demand. Alongside this, the stock has now been relegated from the FTSE 100 index. 

I question if the share price is set to recover. And is now the perfect time for me to invest to ride the rebound? 

Current challenges for Royal Mail

During the pandemic, a rise in parcel deliveries was a lifeline for the company. However, as restrictions eased, the dependence on parcel deliveries slowly evaporated. Domestic parcel volume has already dropped 7% year on year. 

Royal Mail is also highly exposed to rising inflation. Last year, personnel made up 55% of operating costs, and distribution and transportation made up 29.3%. With rising fuel costs and demands for higher wages, I would be surprised if operating costs didn’t rise over the next year. 

On Tuesday, the Communications Workers Union (CWU) ran a ballot on whether to take industrial action. If this was to happen, Royal Mail would face service disruption and may be forced to take on a higher wage bill. This would lower profit margins and hurt the Royal Mail share price. We will have to wait until 19 July for the result. 

Attractive fundamentals? 

It is not all doom and gloom for Royal Mail shares. The company is currently trading with a price-to-earnings ratio of 4.6, which is considerably lower than the current FTSE 250 average of 15. If Royal Mail’s earnings halved and the share price remained the same, the stock would still have a P/E ratio under 10. 

It is worth noting that, despite my future concerns, the current accounts for the last financial year remain relatively strong. Profit only fell 1.3% and revenues rose 0.5%. While this is nothing to write home about, it shows the majority of my concerns have yet to be financially realised. 

Alongside this, Royal Mail shares currently have a solid dividend yield of just under 6%. Forecasts are suggesting this will rise above 8% in the coming years. The dividend also looks relatively stable, with only 32% of earnings being paid out as dividends. This being said, I would like to see earnings growth first before any further rise in the dividend payout. 

What am I doing? 

On the surface, I can see how the Royal Mail share price looks attractive. The low P/E ratio, the high and growing dividend and the considerable drop in value are all encouraging signs to me. However, I believe there are currently too many uncertain challenges facing the company for the share price to bounce back. Industrial action, rising fuel costs and lower parcel demand all cloud Royal Mail’s future. I’m holding off for the foreseeable future. 

The post Down 50%, will the Royal Mail share price bounce back? appeared first on The Motley Fool UK.

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Finlay Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

I question if Tesco is positioned well to cope with rising inflation and muted consumer demand. And also, whether the current share price makes the FTSE 100 stock the perfect addition to my portfolio.

Inflation fears

Supermarkets have typically fared well in times of hardship. Food and drink are essential for human life and, as a result, there will always be a strong underlying demand for food retailers despite economic conditions. This was highlighted in the pandemic where the Tesco share price remained relatively unaffected while other stocks tumbled.

This being said, I believe soaring inflation is still a major threat for Tesco in the coming months. Customers will be forced to pull back their spending and they may shift towards lower-cost competitors such as Lidl and Aldi. Rising fuel and staffing costs will also put a strain on the company’s profit margins.

Being Britain’s biggest retailer means that ballooning wages will have a significant impact on Tesco’s finances. As the company employs around 300,000 individuals, raising the hourly wage by as little as 50p could add hundreds of millions to operating costs.

Robust results

Despite these inflation concerns, Tesco has had a good year. Pre-tax profit for the retailer rose to a healthy £2.033bn from £636m the year before. However, this high growth is likely influenced by poorer pandemic results.

The grocer has also increased its market share to an estimated 27.4% in the last year. This has been done by deepening customer relationships and incentivising brand loyalty through the expansion of Tesco’s Clubcard scheme. CEO Ken Murphy noted that Clubcard members are using discounted prices to fight against the costs of rising inflation. As a result, I believe the loyalty programme could help Tesco keep customers away from low-cost competitors.

A fair share price?

The Tesco share price is currently trading at a price-to-earnings (P/E) ratio of 13. While this is lower than the FTSE 100 average of 15, the company’s P/E ratio does sit slightly higher than direct competitor J Sainsbury’s 7.3 ratio. A further price decline would bring the Tesco P/E ratio more in line with the industry average.

The positive recent results and the growth in market share suggests to me that Tesco is positioned fairly well despite the upcoming challenges. This being said, I don’t believe that the Tesco share price has dropped enough for me to offset the upcoming risks that inflation provides. So, I am holding off from adding this FTSE 100 stock to my portfolio for the foreseeable future.

The post Is the Tesco share price too good to ignore? appeared first on The Motley Fool UK.

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Finlay Blair has no position in any of the shares mentioned. The Motley Fool UK has recommended Sainsbury (J) and Tesco. 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.

Why are Rolls-Royce shares down?

The company, which manufactures engines for wide-body aircraft, was hit hard by the grounding of air fleets in the last two years.

Rolls-Royce operates on a power-by-the-hour basis where airlines pay a flat fee for each hour the engines are used in the sky. Historically this smoothed the company’s earnings, but has harmed revenues when jets remained on the tarmac.

Alongside this, the Rolls-Royce share price plummeted back in February by the announcement that CEO Warren East would be leaving the company at the end of the year. The boss had untaken a successful restructuring programme and steered the company through tough times. With no successor lined up, the long-term vision for the company remains hazy. 

Potential optimism

Global travel restrictions are easing and demand for holidays is expected to explode this summer. With flying hours already up 42% from last year, it is clear things are improving for the airline industry. As a result, I am expecting Rolls-Royce to see a rise in its revenue over the coming months. 

The FTSE 100 firm also has a substantial foot in the defence industry. Rolls-Royce has won a £2bn contract alongside BAE Systems to help build nuclear reactors and boost the UK’s nuclear deterrent. I believe these reliable government contracts will help steady the firm’s revenue over the coming years.

Rolls-Royce is also increasing its presence in the renewable energy sector – another growing market. The small nuclear reactor project aims to provide low-cost nuclear energy solutions for the UK energy grid. While we will have to wait until 2030 for the first operating reactor, I believe this move shows Rolls-Royce is serious about using its engineering expertise to move into new and exciting industries.

My debt concerns

The engineer has certainly not recovered financially from the woes of the last few years. It was forced to inject £7.3bn into operations through the issuance of new debt and equity in 2020. While a successful restructuring programme and the sale of its Spanish subsidiary, ITP Aero, will ease the debt load, more will have to be done over the next few years. 

This high debt load will likely eat away at future margins and decrease profitability. Alongside this, Rolls-Royce is restricted from paying a dividend as part of the terms of some of this issued debt.

What am I doing now?

I can see how the tide is beginning to turn for this FTSE 100 giant. Increasing flying hours and the slight shift towards new markets are all positive signs to me. However, as flying hours have yet to return to pre-pandemic levels, I think there are too many obstacles for the Rolls-Royce share price to make a quick recovery. As a result, I’m holding off from Rolls-Royce for the foreseeable future.

The post Is the Rolls-Royce share price ready to take off? appeared first on The Motley Fool UK.

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Finlay Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The Scottish Mortgage Investment Trust (LSE:SMT) share price has had a rocky six months after falling 50%. Despite this, the trust has had a history of strong benchmark-beating performance. The share price is still up 85% in the last five years while the FTSE 100 has remained flat. Does this slashed share price allow me to invest in an exciting and competently managed investment trust at a discounted price?

Why is the share price falling?

Contrary to its name, Scottish Mortgage has nothing to do with mortgages. The trust has holdings in high-growth companies from across the world and has some of its largest positions in Moderna, Tesla and Illumina. This was a successful strategy as tech companies rode the wave of the pandemic recovery last summer.

However, positioning itself towards these high-tech growth shares has also been the reason for the falling share price in recent months.

As rising inflation has gripped economies, interest rates have been forced upwards and debt has become more expensive. This has harmed growth companies that rely on higher amounts of debt to finance expansion of their operations. As a result, share prices in all five of its major holdings are down in 2022 and Scottish Mortgage has suffered.

Alongside this, there’s been a shift in leadership in the latest year, which could alter its future performance. James Anderson, the man who made Scottish Mortgage what it is today, stepped down in April after 21 years at the helm. While the current team is hugely capable, the trust could still miss Anderson.

Signs of hope?

Despite the tough few months for the Scottish Mortgage share price, there are a few reasons I’m remaining optimistic.

I’m a firm believer that it takes several years to truly evaluate the quality of investments. As a result, it would be unfair to judge Scottish Mortgage on short-term results when the bigger picture is more important.

Management has noted that the trust focuses on returning value over five-year periods and has little control over short-term fluctuations. And, up 85% in five years, the stock has returned value over longer timeframes.

With a history of picking big winners, Scottish Mortgage could certainly give me exposure to exciting growth shares from around the world.

What am I doing?

I can understand the attraction of the falling Scottish Mortgage share price. I could get a slice of an exciting investment trust that has performed well in the past for a discounted price.

However, to invest, I would have to have full confidence in the shares the trust owns. And sadly, I don’t. I believe the growth stocks will fall even further from the highs of last year as they continue their battle with inflation and rising interest rates. So, I’m steering clear for the foreseeable future.

The post After halving in value, is the Scottish Mortgage share price too cheap to ignore? appeared first on The Motley Fool UK.

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Finlay Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.