It’s been a tough year for investors in Scottish Mortgage (LSE: SMT). Rising inflation as a result of supply chain issues, alongside the tragic war in Ukraine has seen the investment trust reverse some of the fine form that it’s produced in the past few years. In 2022, the Scottish Mortgage share price is down just shy of 40%. In the last 12 months, the trust has fallen nearly 45%.

It’s clear the next few months may be volatile when it comes to investing in the stock market. However, I think Scottish Mortgage shares, currently trading for well below 800p, could be a smart long-term addition to my portfolio.

The story so far

Scottish Mortgage made a name for itself back in 2020 when it rose an impressive 105% despite Covid-19 running rife on markets. However, since then, the trust’s growth has significantly slowed.

The main reason for its demise year to date is inflation. Rates have been on the rise across the globe. And as a result, markets have seen trillions wiped off their value. Inflation has at times been above 10% in both the US and the UK. And with rates showing no sign of slowing down, this could spell trouble for the Scottish Mortgage share price.

This is because during these volatile periods the worst affected assets are growth stocks, which Scottish Mortgage focuses on holding in its portfolio. Due to the volatility these stocks provide, investors tend to shy away from them during difficult times, instead switching to ‘safer’ alternatives.

Due to this, investors have been selling off their shares in the trust. With its top holdings including names such as Tesla and ASML, which are down 40% and 38% this year, it’s clear to see why Scottish Mortgage has suffered.

Is it time to buy?

Despite this, I think now may be the perfect time for me to buy the stock.

Firstly, the investment style adopted by its management team is one I can relate to. By this, I mean buying for the long hold.

Performance is measured over a five-year+ period, meaning the volatility that can be seen in the markets right now shouldn’t pose a threat. While past returns are not an indication of future performance, the last five years have seen the trust return an impressive 80%.

On top of this, I also like the diversification I get through buying Scottish Mortgage shares. As a retail investor, I get access to over 100 companies all through a single investment. For me, this is perfect.

One issue is its weighting to China. With some cracks beginning to appear in the country’s economy, this could leave the trust exposed. On top of this, as inflation rises in the months ahead, the trust may also see its price take a hit.

With this said, I’d happily open a small position in Scottish Mortgage today. Its focus on growth stocks combined with its long-term approach leads me to think I could see some healthy returns in the years ahead. I also think its weighting in China will bear fruit in the long run.

The post The Scottish Mortgage share price is below 800p! Is it time to buy? appeared first on The Motley Fool UK.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML Holding. 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.

It’s been a poor year for Scottish Mortgage (LSE: SMT) shares. The investment trust has been one of the top performers over the past decade, returning a whopping 450% to shareholders within this time. However, as inflationary concerns continue to bite, the stock has fallen nearly 45% across the last year.

So, is this fall a chance to buy Scottish Mortgage shares? I believe so. Here’s why.

Delving deeper

Let’s start by taking a closer look at why Scottish Mortgage has fallen in recent times.

The main driver behind this is inflation. Rising rates have seen global markets being pushed downwards in 2022. And with rates in countries such as the UK looking like they’re unlikely to slow down anytime soon, this has seen the Scottish Mortgage share price suffer.

During tough times the worst affected assets are growth stocks, which the trust focuses on holding. Due to their volatile nature, investors tend to turn their backs on such investments, instead opting for ‘safer’ alternatives.

Scottish Mortgage’s top holdings include the likes of Tesla and ASML, which have fallen 30% and 41% this year respectively. With this in mind, it’s clear to see why the stock has seen its price drop.

Is now the time to buy?

With that said, does it open the door for me to grab some cheap shares? After all, I think the trust has plenty of positives that make it a buy.

Firstly, Scottish Mortgage’s management investment style aligns with mine. And by this, I mean buying for the long term. The managers say performance is measured over a five-year+ timeframe. Therefore the volatility we’re currently experiencing could be seen as an opportunity rather than an issue.

While past performance is no indication of future returns, the last five years have seen Scottish Mortgage return 82% to its patient shareholders, highlighting the strength of long-term investing.

What I also find attractive is the diversity this single investment offers me. Buying Scottish Mortgage shares means I get exposure to over 100 companies, including over 50 unlisted businesses. And its cheap ongoing charges of 0.32% are an added benefit.

But there are a few factors that could drag its share price down in the months ahead.

To start, inflation looks like it’s set to continue to rise for the foreseeable future. This has been the main catalyst behind the trust’s downfall, so I wouldn’t write off the stock falling further should rates continue to spike.

Scottish Mortgage also has a large weighting to China. And with the country experiencing ongoing Covid struggles alongside a property crisis, it may be a while before we begin to see the extreme growth that we’ve seen in the Chinese economy in years gone by.

I’d still buy

Despite these issues, I’d still buy Scottish Mortgage shares today and hold for the long haul. The trust has proved it can return hefty profits to shareholders. And while in the short term China may experience further issues, I think that the stock’s weighting to the world’s second-largest economy could turn out to be a winner in the future.

The post Scottish Mortgage shares are down nearly 45%: is it time to buy? appeared first on The Motley Fool UK.

More reading

• How UK investors can get access to the $2trn SpaceX stock IPO TODAY
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• Is Elon Musk about to send this FTSE 100 stock into orbit?
• Want to know what UK investors have been buying in their ISAs?
• How long might it take to become an ISA millionaire?

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML Holding and Tesla. 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 (LSE: SMT) share price has taken a beating over the past year, down 33%. With inflationary pressures causing a weak economic outlook, investor confidence in stocks such as Scottish Mortgage has waned in 2022.

The investment trust has been a top performer over the past decade. And despite a 52-week low of 670p, the Scottish Mortgage share price is currently sitting at around 900p. Here’s why I think the stock could be a great long-term addition to my portfolio today.

Scottish Mortgage decline

As mentioned, this year has been nothing to write home about for Scottish Mortgage. With inflation spiking globally, including 10.1% and 8.5% for the UK and the US respectively, the trust has been in the firing line of this.

With a focus on growth stocks, some of its top holdings have seen large losses as investors have shied away from such businesses.

Its tech-heavy focus has also fuelled this downfall as the sector has seen a market correction this year. Combined, this has driven down the stock’s price.

Not all bad news

Despite this, it’s not all bad news for Scottish Mortgage.

For a start, the last month has seen the stock rise 13%, clawing back some of its recent losses. This could be a sign that investors are beginning to gain confidence in the trust once again.

Yet more importantly, what’s crucial for me is Scottish Mortgage’s long-term outlook. Sure, it’s had a tough year. However, management highlights that performance is judged over a five-year stretch. And therefore, short-term volatility is less of an issue to me. While past performance is no indication of future returns, the last five years have seen Scottish Mortgage shares rising 114%. Pretty impressive.

As a retail investor, I also deem the range it offers my portfolio to be vital. With one investment, I get a slice of stocks from a variety of sectors and countries.

What this essentially does is help offset risk. By owning a slither of each stock through the trust I’m avoiding the riskier play of buying its holdings, such as ASML, directly.

One issue I do have is its relatively large weighting in China. The nation recently reduced its medium-term lending rate by 10 basis points as data revealed a slowdown in consumer demand. With cracks starting to appear in its economy, this could spell bad news for Scottish Mortgage.

However, I still have faith in the Chinese economy’s potential to produce the ‘next big thing’. Scottish Mortgage has an eagle eye when it comes to finding high-growth companies that produce juicy returns.

I’m still buying

So, despite the near-term issues it may face, I’d still buy the shares today. I think from a long-term perspective its weighting in China has the ability to bear fruit. Add this to the diversity it offers my portfolio, and I’d happily open a position in the stock.

Trading at around the 900p mark, I’d buy Scottish Mortgage shares today and hold for the long run.

The post The Scottish Mortgage share price has suffered. Here’s why I’d still buy! appeared first on The Motley Fool UK.

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• How UK investors can get access to the $2trn SpaceX stock IPO TODAY
• A SIPP opened at birth could be worth £10m in 55 years
• Is Elon Musk about to send this FTSE 100 stock into orbit?
• Want to know what UK investors have been buying in their ISAs?
• How long might it take to become an ISA millionaire?

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML Holding. 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.

So, after a dent in its previous impressive form, does this recent fall present me with an opportunity for me to buy? Or should I be steering clear of adding SMT to my portfolio? Let’s take a look.

SMT share price fall

Let’s begin by looking at why the trust’s share price has taken such a hit recently. One factor it can be attributed to is rising interest rates. As my colleague Andrew Mackie highlighted, interest rates have slowly begun to creep up again after they were slashed near zero during the pandemic. And this, along with soaring inflation, has had a direct impact on SMT due to its heavy exposure to unlisted and growth stocks.

As these companies tend to be indebted in order to fuel growth, rising interest rates mean these debts will become more difficult to handle. As such, in times like these investors tend to put their money into value stocks. 

A further reason for the fall is SMT’s tech-heavy weighting. With its top 10 holdings including ASML, Nvidia, and NIO, this means that when tech companies are doing well (as they were), the Scottish Mortgage share price rises. However, the recent tech sell-off means that these stocks have tumbled in price, reflected in the drop off the SMT share price, highlighting the negative connotations that can exist with its large exposure to the sector.

Long-term outlook

However, there are factors that excite me when looking at SMT. One reason I would consider adding SMT to my portfolio is its long-term outlook. The fund managers aim to beat the FTSE All-World Index over a five-year rolling period, and its history clearly shows that SMT can do so. For comparison, the Scottish Mortgage share price is up over 220% in the last five years, while the FTSE 100 has managed just 5%. Given this, the current dip could just be short-term volatility, therefore presenting me with a good opportunity to buy some shares at a reduced price.

Further, while many of SMT’s big holdings are tech stocks, the trust does allow me to enjoy exposure to an array of sectors within a single investment. For example, another one of its top holdings (8.1%) is pharmaceutical stock Moderna, best-known for its Covid-19 vaccine. 

It also provides further diversification through its global investment strategy, an example being its weighting in China. And for me, this is an attractive factor.

Should I buy?

So will I buy? Well, this depends. If I was considering adding SMT to my portfolio for a shorter timeframe than five years – then no. However, as a long-term investor, I think SMT at its current price could be a solid addition to my portfolio. The trust has a proven track record, and the manager’s long-term outlook is one that clearly bears fruit. Even though SMT is experiencing a volatile period, I would look to add some shares to my portfolio today.

The post The Scottish Mortgage share price is down 14%. Should I buy? appeared first on The Motley Fool UK.

More reading

• How UK investors can get access to the $2trn SpaceX stock IPO TODAY
• A SIPP opened at birth could be worth £10m in 55 years
• Is Elon Musk about to send this FTSE 100 stock into orbit?
• Want to know what UK investors have been buying in their ISAs?
• How long might it take to become an ISA millionaire?

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML Holding. 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.