Scottish Mortgage Investment Trust (LSE:SMT) is a publicly traded investment trust that invests globally. The FTSE 100 firm has seen a drop off in price recently so is now a buying opportunity?
FTSE 100 opportunity?
SMT looks for strong businesses with above-average returns. It has no constraints as to geography, industry, or sector. It had an excellent 2020 and I believe it has the potential to have a similar 2021, if not better.
The past five years, Scottish Mortgage Investment Trust shares have returned over 350%. It’s share price increased by over 110% in 2020 alone. Considering we have been in a global pandemic and a financial slump in the markets, that’s not bad in my opinion. It is currently trading at close to 1,116p per share as I write.
The past month or so has been a slightly different story. Investors have begun to sell shares due to valuation concerns. These valuations are linked to the US tech sector where Scottish Mortgage Investment Trust owns a number of stocks such as Amazon, Netflix, and Alibaba to name a few. Between February and 15 March, SMT lost close to 20% in share price value.
Why I like Scottish Mortgage Investment Trust
SMT is run by experienced investment duo James Anderson and Tom Slater. The duo have been with Baillie Gifford, the Edinburgh-based asset manager behind the trust, for a significant amount of time. In simple terms, as a savvy investor, I would be paying for the wealth of experience these two possess.
Scottish Mortgage Investment Trust has performed well consistently over a sustained period of time and I believe it is a testament to the experienced team behind it. We all know that past performance doesn’t guarantee future performance. But I do think it shows flexibility and adaptability in differing conditions, which puts me at ease as an investor.
SMT owns a number of tech stocks within its portfolio. I am a fan of tech stocks. FTSE technology stocks have become defensive options in the past year or so. The Covid-19 pandemic has changed the role technology plays in our day to day lives at a faster rate than many could have predicted. Almost 10% of Scottish Mortgage Investment Trust’s portfolio is made up of Tesla, which is another stock I like.
High risk or big reward?
Scottish Mortgage Investment Trust shares do possess risks. Its share price has experienced some volatility. Only six weeks ago it was flying high, but I believe market conditions are still fraught and changes could be afoot when conditions do normalise. It could be argued the recent decline is a sign of market conditions normalising. Furthermore, Scottish Mortgage Investment Trust holds substantial shares in stocks that are considered to be in a ‘bubble.’ This means activity and performance can curve upwards in the short-term but slow down and stagnate in the long term, so there is a risk of that too.
SMT performed brilliantly in 2020 and I believe it will continue that trend in 2021 and beyond. It is on my best stocks to buy now list, as is this FTSE stock. I believe investing in Scottish Mortgage Investment Trust could protect my money as it spreads across a diverse range of stocks. I would currently rate it as a buying opportunity.
Jabran Khan 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.