I own shares in it Scottish Mortgage Investment Trust (LSE: SMT). Although I entered my position more recently than two years ago, I have watched with dismay as my Scottish mortgage share has fallen since I bought it.
The loss would have been worse if I had bought my shares two years ago. However, I invested knowing that it was a high yield/reward. Also, as a long-term investor, I am more concerned with my performance over ten years than the short-term.
Let’s examine the return I made on a £1,000 investment in January 2021, and why I think shares are cheap after a lot of hair.
Go back two years
Two years ago, the FTSE 100 investment confidence grew as the net asset value (NAV) of his mutual fund rose.
Scottish Mortgage’s share price was trading at 1,229p, boosted by a strengthening economy in response to the Covid lockdown.
Today, the stock is changing hands for 770p. That’s a 37% drop in 24 months.
In 2021, I was able to buy 81 shares and £1k in total, leaving £4.51 as spare change. Those shares will now be worth £623.70.
As an equity growth fund, Scottish Mortgage is not known for its dividends. However, I would have received a few small dividend payments during that period of around £5.80.
Therefore, my total today is £634.01, including shareholders’ dividends and expenses.
Increased stock distribution
The Baillie Gifford investment trust has a clear purpose. In the words of co-owner Tom Slater, the pursuit of “long term capital appreciation by investing in the most successful companies of the world’s long-term growth and accepting the use of the things that reach them.“
Looking at the long term, the fund has been successful in delivering returns. Over five years, a Scottish Mortgage share is more than FTSE All-World Index the company uses it as a brand.
So why is the stock so volatile? To answer this, it helps to examine the stocks he owns. For example, the top fund is biotech pioneer mRNA Modernization to 10.6% of the Scottish Mortgage portfolio.
Moderna stock attracted interest from traders during the pandemic due to the development of its effective vaccine against Covid-19. Scottish Mortgage has scheduled its entry to meet FDA approval in December 2020.
Talking about Moderna as just a Covid vaccine is similar to Amazon’s pigeon being just a library in the early 2000s.
Scottish Mortgage Investment Trust
Moderna’s share price has since fallen as investors have turned to other things, looking at investment protection and inflation. However, with a diverse pipeline against cardiovascular disease, cancer, infectious diseases and autoimmune diseases, Scottish Mortgage supports the company to deliver significant income in the coming years.
I buy more today
Such a Scottish mortgage carries significant risks. I expect more changes to come, given the nature of the company’s portfolio.
However, I trust the management of the fund to identify the successful funds of the future. I will take the opportunity to reduce my average share price by investing more today as shares trade at 8.3% discount to the NAV of the file.
The pole If I had invested £1k in Scottish Mortgage shares 2 years ago, this is how much I would have now! first appeared on The Motley Fool UK.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charlie Carman has a position at Scottish Mortgage Investment Trust. The Motley Fool UK recommends Amazon.com. The opinions expressed in the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our specialized services such as Share Advisor, Hidden Winners and Pro . Here at The Motley Fool we believe that thinking about a lot of different information makes sense we are better entrepreneurs.
Motley Fool UK 2023