Over the past few weeks, the FTSE 100 has plunged by around 33%. However, there’s one index member that’s managed to stand out in this decline, and that’s the Scottish Mortage Investment Trust (LSE: SMT).
FTSE 100 leader
Scottish Mortage is one of the largest investment trusts in the UK. Over the past 10 years, it’s smashed the broader market by investing in high growth tech stocks. It would appear this is why the trust has outperformed the market over the past few weeks.
The fund’s most substantial holdings include some of the most successful business of the last decade, including Amazon.com, Alibaba Group and Tencent.
Unfortunately, some FTSE 100 businesses will struggle to survive through the current economic disruption. However, the secular tailwinds that have driven growth at these enterprises over the past decade should continue to push them forward for many years to come.
Almost all of the companies in the portfolio have a definite competitive advantage. Take the trust’s second-largest holding, Illumina Inc, for example.
Illumina develops, manufactures, and markets integrated systems for the analysis of genetic variation and biological function. In this specialist market, reputation is everything. Illumina has been producing these systems for over two decades, and revenues have grown consistently every year .
Because it’s one of the best in the business, and consistently invests millions every year to stay ahead of the competition, Illumina’s profit margins are close to 70%. That shows just how much of an edge this company has over other businesses.
Scottish Mortage’s focus on these high-quality businesses goes some way to explaining why the trust’s shares have outperformed the FTSE 100 over the past few weeks. It seems highly likely this will continue as China’s economy comes back on line.
Alibaba Group and Tencent are two of China’s largest internet companies, and initial indications suggest they have managed to navigate China’s economic shutdown quite well. These holdings should provide a hedge against losses in the rest of the portfolio.
Amazon.com also looks well-positioned to maintain its growth. As the world’s largest online retailer, demand for its services should grow as more and more consumers are asked to stay home.
Overall, this selection of high-quality businesses should continue to outperform the rest of the market.
Worth a closer look
As such, if you’re looking for bargains in the current market, Scottish Mortage might be worth a closer look.
At the time of writing, the trust is trading at a rare discount to net asset value. On top of this, the shares support a dividend yield of 0.6%. That appears relatively attractive in the current interest rate environment. The management fee is a relatively low 0.4%.
If you’re looking for somewhere safe to invest your money over the next five to 10 years, it could be worth taking a closer look at Scottish Mortage. Over the past decade, the trust has returned 300% for investors.
It’s ugly out there…
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Rupert Hargreaves owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alibaba Group Holding Ltd. and Amazon. 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.