Scottish Mortgage Trust is well-known for riding the long bull market in leading US Nasdaq stocks. It was one of the first to invest Tesla. While that bet has been pared back somewhat (5.3% of portfolio still owns Tesla), other companies are slowly replacing it. After such a long bull market SMT can be vulnerable to a further decline.
What are the pros and cons of investing in the Scottish Mortgage Trust?
On the upside:
- SMT is managed by an experienced team who had researched their investment thoroughly
- Globally positioned, SMT invests in many parts of the world as long as the business systems are competitive
- Portfolio includes many privately listed companies that average investors couldn’t buy (see below)
- A well-diversified equity portfolio geared towards businesses with strong ‘moats’ or excellent long-term growth
But you should be aware that:
- SMT’s share price trend is fairly violent these days; swings in share prices may be higher than expected since the trust is still mired in a bear trend; technical support is observed at 600p
- Tech shares may decline or underperform the market
- Privately-listed companies valuation are unknown – since they’re not “marked to market” regularly
Here are the (latest) top 16 holdings of the Scottish Mortgage Trust:
Source: Scottish Mortgage Trust (Aug 2023)
Over the past year or so, they have relinquished older bets and acquired newer (and hotter) tech stocks like Nvidia (NVDA) – the leader in the AI boom.
Perhaps a thematic grouping of SMT’s portfolio may help you to understand the the fund’s structured. Broadly, SMT’s holdings are concentrated among:
- Technology – ASML, Nvidia, Tesla,
- Healthcare – Moderna, Illumina
- China – PDD, Meituan, ByteDance, Tencent
- Consumer – Amazon, Mercadolibre, Kering, Ferrari,
- Private – Space Technologies, Northvolt
In sum, Scottish Mortgage is about pivoting into the next-gen sector leaders that can bring sustained growth over many years.
Source: Scottish Mortgage Trust