It’s very rare to see Scottish Mortgage (LSE: SMT) shares falling. But that’s exactly what has been happening recently. I reckon this blip in the share price is a buying opportunity for investors. Here I’ll explain why.
The technology stocks
Scottish Mortgage has a high exposure to technology. In fact, this remains a key theme in the concentrated portfolio. It holds the likes of Tesla and Amazon.
Technology stocks have recently taken a hit and in turn,Scottish Mortgage shares have fallen. I think that investor sentiment may be changing and the focus is on the post-Covid-19 recovery. This means that stocks that were hit by the pandemic could rise. I reckon investors were taking some profits from their technology shares. But I don’t blame them, the sector has had a good run.
At one point last year, Scottish Mortgage was holding over 10% of the portfolio in Tesla. I’m glad to say that the fund managers have now taken profits on the stock and reduced their weighting. As at the end of January, the investment trust had a 5.1% weighting in the electric car maker.
Experienced investment duo
Despite the technology sell-off, I’d still buy Scottish Mortgage shares in my portfolio as a long-term investor. I think the first thing to note is that when buying a trust, I’m really paying for the investment experience of the fund manager(s).
The portfolio is run by the investment duo, James Anderson and Tom Slater. Both have been with Baillie Gifford, the asset manager behind the trust, for a long time. I think they’re experienced individuals and their impressive performance isn’t a fluke.
One of the things I look out for is consistent performance over the long term. With Scottish Mortgage shares I get exactly that. This shows me that the fund managers are adaptable and can deliver strong returns during various market conditions. The fact that they’ve reduce their holding of Tesla also shows me that they’re a prudent pair.
Scottish Mortgage shares also offer me some exposure to private companies. Approximately 17% of the portfolio is invested in such unquoted stocks.
I think with the investment trust, I get the best of both worlds. A portfolio of listed and unlisted shares. I agree with the fund managers and reckon that the unquoted space is full of compelling opportunities.
Scottish Mortgage shares aren’t without risk though. The performance it achieved in 2020 isn’t guaranteed to occur in 2021 and beyond.
The portfolio is concentrated and the fund managers aren’t afraid to takes large stock positions. This could go right but also could work against them. As I mentioned before, technology is a key theme and such stocks could fall again, which could impact the investment trust.
Trading at a discount
It’s very rare to see Scottish Mortgage shares trading at a discount to its Net Asset Value (NAV). At time of writing, the investment trust is at a 3.6% discount to NAV.
I reckon this is a buying opportunity. Scottish Mortgage shares offer a competitively priced investment trust, with an ongoing charge of 0.36% and exposure to a global portfolio of stocks. It also has an impressive performance track record. I can’t argue with this, hence I’d buy the shares.
Nadia Yaqub has no position in any of the shares 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 Amazon and Tesla and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on 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.