Scottish Mortgage Trust has already outperformed major US indices this year, but its biggest catalyst could still lie ahead. With SpaceX potentially heading for the largest IPO in history and AI exposure through Anthropic, our expert analysis explores whether SMT’s technology-heavy portfolio can continue climbing, or whether expectations are already fully priced in.
Scottish Mortgage Investment Trust Plc Share Price Forecast & Rating [SMT]
Is now a good time to buy Scottish Mortgage Investment Trust Plc?
Scottish Mortgage Trust is one of the UK’s largest Investment Trusts. Managed by Baillie Gifford, the stock has very little, if anything, to do with mortgages in Scotland; instead, it’s renowned as one of the UK’s largest technology investors.
It has substantial holdings in companies such as Amazon, Nvidia, TSMC, and Meta Platforms. In fact, its portfolio is something of a who’s who of technology.
Unlike many other quoted investment companies, Scottish Mortgage Trust does not confine itself to purely listed vehicles; indeed, it has a significant book of private equity investments, and the trust has often been an early adopter in these businesses.
Perhaps the jewel in the crown among the PE holdings is the stake Scottish Mortgage owns in SpaceX, or to give it its full title, Space Exploration Technologies.
SpaceX accounts for almost 20.0% of the trust’s entire portfolio, which is meaningful when you realise that SpaceX is likely to IPO this year with a potential valuation of between $1.75 and 2.0 trillion dollars.
The IPO will be the largest ever and is likely to create significant demand among index-tracking funds for SpaceX stock.
This means that SMT’s SpaceX stake is likely to be worth around $3.0 billion, out of the total portfolio of value of around $20.00 billion.
However, given that Nasdaq is adjusting its listing rules to accommodate the SpaceX IPO, it’s not impossible to imagine a situation where the stock roars off the launch pad, exceeding even the top end of its IPO valuation.
Scottish Mortgage will be a seller of at least some SpaceX shares, as the holding will be too large for the fund’s mandate. It’s been here before, of course, with another Elon Musk company in the shape of Tesla.
Scottish Mortgage currently trades above its NAV, or net asset value, of £14.08, and that premium is partially driven by the SpaceX stake but also by its holding in AI provider Anthropic, the owner operator of Claude AI.
Forecast:
Scottish Mortgage stock has gained +21.52% year to date, comfortably outperforming the Nasdaq 100, the S&P 500, and the iShares MSCI Momentum Factor ETF MTUM, so one could argue that, against that background, it’s fully valued.
Technical Outlook:
SMT posted a new three-year high this week at £14.67, but then rejected the move higher. Recent spikes in volume haven’t delivered additional upside momentum. So for now, the risk remains to the downside. That said, the stock is not overbought on the RSI indicator on time frames between 9 and 100 days.
Fundamental Outlook:
US equity markets have rallied strongly from their Iran war lows, with the S&P 500 posting new all-time highs. Q1 earnings have been broadly positive.
The information technology sector has added +20.75% in the last month, all of which is bullish for SMT.
Of course, we don’t yet have a definitive peace deal, and so the macro background remains changeable. SMT stock will remain sensitive to news about the SpaceX IPO and its timetable, but also to the narratives (both good and bad) around AI and its implementation.
Pros
- Technology-focused portfolio.
- Owns some of the world’s most important stocks.
- Its valuation is being driven by popular narratives/market themes.
Cons
- PE holdings are hard to value accurately.
- Trades at a premium to its NAV (fully priced?)
- Not much thematic diversification in the tech-heavy portfolio.
- Technical Outlook (3)
- Fundamental Outlook (4)
Overall
3.5
With over 35 years of finance experience, Darren is a highly respected and knowledgeable industry expert. With an extensive career covering trading, sales, analytics and research, he has a vast knowledge covering every aspect of the financial markets.
During his career, Darren has acted for and advised major hedge funds and investment banks such as GLG, Thames River, Ruby Capital and CQS, Dresdner Kleinwort and HSBC.
In addition to the financial analysis and commentary he provides as an editor at GoodMoneyGuide.com, his work has been featured in publications including Fool.co.uk.
As well as extensive experience of writing financial commentary, he previously worked as a Market Research & Client Relationships Manager at Admiral Markets UK Ltd, before providing expert insights as a market analyst at Pepperstone.
Darren is an expert in areas like currency, CFDs, equities and derivatives and has authored over 260 guides on GoodMoneyGuide.com.
He has an aptitude for explaining trading concepts in a way that newcomers can understand, such as this guide to day trading Forex at Pepperstone.com
Darren has done interviews and analysis for companies like Queso, including an interview on technical trading levels.
A well known authority in the industry, he has provided interviews on Bloomberg (UK), CNBC (UK) Reuters (UK), Tiptv (UK), BNN (Canada) and Asharq Bloomberg Arabia.
