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2 cheap FTSE 100 stocks I’d be keen to snap up in March!

Charlie Keough — Sun, 05 Mar 2023 09:00:51 +0000

The FTSE 100 has had a strong start to the year, up around 5%. And as such, Iâm on the lookout for FTSE 100 stocks I can buy this month.

Investors had a tough time in 2022 as the Russia-Ukraine conflict alongside red-hot inflation saw global markets take a hit. Yet despite this, the index flexed its strength, posting a slight gain for the year. In contrast, the S&P 500 saw a 20% fall.

Much of the same is expected in 2023. However, with the FTSE 100 posting a strong start, I have my eye on two stocks that I think would be solid additions to my portfolio. Letâs take a closer look.

Scottish Mortgage Investment Trust

The first on my list is Scottish Mortgage Investment Trust (LSE: SMT). Last year was a bleak time for growth stocks as investors shied away from these riskier investments. As a result, the Scottish Mortgage share price nosedived by 40%.

The trust has also got off to a slow start year to date, with its stock slightly down. However, I like the look of the Baillie Gifford fund as a long-term buy.

To start, as a retail investor, what I most like about Scottish Mortgage is the exposure I gain under one investment. The trust invests in over 100 companies, including unlisted firms, meaning I diversify my portfolio through owning it.

Scottish Mortgage is also currently trading at around a 15% discount to a net asset value of 835p per share, which signals that the fund is undervalued. This suggest that I can access its top holdings such as ASML and Tesla cheaper than their market rate. Clearly, this is a positive.

Despite this, itâs weighting to China has seen it underperform recently as the country has struggled with its ongoing battle with Covid-19. And on top of this, with interest rates set to be hiked further, the trust could take a hit given its focus on growth stocks.

However, with a long-term focus, and with the diversification it offers my portfolio, I like the look of Scottish Mortgage.

Second on my list is retail giant Next (LSE: NXT). Unlike Scottish Mortgage, the stock has got off to a strong start in 2023, rising an impressive 15%.

One reason for this is that in January the business raised its pre-tax profit forecast by Â£20m to Â£860m. This was due to a rally in full-price sales in the nine weeks to the end of 2022.

The stock also looks cheap to me. It currently trades on a price-to-earnings ratio of 12. For a business of Nextâs quality, I think this presents good value. Recently, it has also looked to expand, with its latest move being the acquisition of fashion company Joules.

The biggest threat for Next in the months ahead is rising costs and the potential for consumers to cut back on spending. However, as a strong brand with plenty of experience in the fashion retail industry, Iâd be willing to snap up some Next shares.

The verdict

I donât have the spare cash to buy these FTSE 100 stocks in March, otherwise, Iâd be keen. Should this change in the near future, I’ll be looking to pick up both.

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

I’d buy these 2 FTSE 100 stocks in 2023 and hold them for a decade

Charlie Keough — Tue, 06 Dec 2022 09:30:00 +0000

2022 has been tough to navigate as a retail investor. The Russia-Ukraine conflict along with surging global inflation has seen many parts of the market depressed this year. However, Iâm always keen to remain optimistic. Therefore, with 2023 around the corner, Iâm on the hunt for some FTSE 100 stocks I can buy in the New Year and hold for the long run. Here are two I have my eye on today.

GSK

The first is pharmaceuticals giant GSK (LSE: GSK). The stock has struggled lately, down nearly 12% year to date.

However, I think the New Year could be a great time to add the stock to my portfolio. Firstly, GSK has posted strong results so far in 2022. In its most recent update, the business announced sales growth of 9%, up to nearly Â£8bn. And as a result, the firm raised its full-year outlook, with growth in sales now expected to come in between 8% and 10%. This comes on the back of it already raising its guidance in its half-year update, showing that the business is going from strength to strength.

Elsewhere, I also like the moves GSK has made this year to streamline. The most noticeable of these was the demerger of its consumer healthcare business Haleon. The split will allow GSK to reorganise its operations and place greater emphasis on the development of vaccines and medicines. It also managed to siphon off Â£7bn in debt as part of the move.

What’s also enticing about the stock is the meaty dividend yield it offers. With a yield of around 7%, this offers me some protection against inflation. As we enter 2023, the passive income stream generated from GSK shares seems to be a smart play.

In the short term, the business could face headwinds such as rising costs as inflation continues to rise. However, for a long-term buy, I like the look of GSK.

SMT

The second stock I like the look of is Scottish Mortgage Investment Trust (LSE: SMT). The trust has seen 40% shaved off its value in 2022 as investors have turned their back on growth stocks.

Despite this, I think Scottish Mortgage could be a solid buy at its current price. The diversity it offers my portfolio is attractive. With over 100 companies under its umbrella, including some unlisted businesses, I gain access to a variety of stocks under one investment.

What I also like is Scottish Mortgageâs investment style. By this, I mean that management buys for the long run. The managers measure performance over a more-than-five-year timeframe. And while past performance is no indication of future returns, the last five years have seen SMT return 77% to shareholders. Impressive.

Inflation will continue to weigh the stock down in the short term. And its heavy weighting in China could see it suffer in the months ahead. However, I believe in the long run that this weighting will bear fruit. Iâd be happy to buy in the New Year and hold for a decade.

The verdict

Unfortunately, I wonât have the cash to buy both of these next month. I should have enough to buy one for now, so Iâll probably look to pick up GSK first.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Gsk Plc and Haleon Plc. 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 share price is below 800p! Is it time to buy?

Charlie Keough — Sat, 08 Oct 2022 08:00:34 +0000

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.

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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.

Scottish Mortgage shares are down nearly 45%: is it time to buy?

Charlie Keough — Fri, 02 Sep 2022 08:25:20 +0000

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.

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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.

Scottish Mortgage shares are down 36%: should I buy now?

Dylan Hood — Tue, 30 Aug 2022 07:32:00 +0000

Scottish Mortgage Investment Trust (LSE: SMT) shares have fallen a whopping 36% so far in 2022. The main reason for the drop is rising inflation and subsequent interest rate hikes, which have weighed on stock market valuations. Over a 12-month period, the situation looks even bleaker, with the shares falling just under 40% in value. With inflation still on the rise, is now the time to buy this stock? Let’s find out.

A rocky road

Red hot inflation has been a key market trend in 2022. With UK inflation reaching 10.1% in July and predicted to rise to over 18% by January, the situation looks pretty grim. Interest rates have been hiked to 1.75% in the UK in an effort to curb rising prices. This is putting severe pressure on growth stock valuations, which is very bad news for Scottish Mortgage. This is because the trust’s holdings are primarily focused on exactly this type of asset.

For example, the trust’s top three holdings are Moderna (8.3%), Tesla (6.7%), and ASML (6.6%). All of these stocks fit into the high-growth stock category and have exhibited high volatility so far in 2022. As interest rates continue to rise, and markets become increasingly uncertain, Scottish Mortgage shares could be in for an ongoing bumpy ride.

Another reason why the shares have suffered is pressure from Chinese regulatory authorities on US-listed Chinese companies. This has sparked the threat of potential delisting, which has vastly reduced investor confidence. Companies like NIO (which makes up 2.9% of Scottish Mortgages portfolio) have seen their shares tank on the potential of being delisted from the NYSE.

Reasons I like the stock

So why do I like the trust? For starters, at 829p, the shares are much cheaper than they were a year ago. In addition to the lower price, I adopt a longer-term outlook when looking at shares. Baillie Giffords’s flagship trust looks to “add value over five-year time frames, preferably much longer”. So, maybe I should discount the upcoming short-term volatility and look further into the future. Although past returns are no indication of future performance, Scottish Mortgage’s 606% 10-year return – compared to a 231% return for its benchmark the FTSE All World Index – highlights the stellar management of the trust.

In addition to this, being an investment trust, it allows me access to a bundle of assets in different industries, all under one investment. This is great for reducing my portfolio’s risk level. It also allows me access to non-listed companies, like Elon Musk’s SpaceX, in which Scottish Mortgage owns a £430m stake.

Am I buying?

I think that in the short term, Scottish Mortgage shares could face more volatility. However, here at The Motley Fool, we’re long-term investors. I think that under £9, the investment trust shares could land me some healthy returns over a broader time horizon – say 10 years. For that reason, I’m seriously considering adding this stock to my portfolio at today’s price.

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Dylan Hood 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.

Are Scottish Mortgage shares a bargain at 822p?

Dylan Hood — Tue, 23 Aug 2022 08:27:55 +0000

2022 has been a tough year for growth stocks. It’s only natural that investment trusts that target growth stocks have taken a beating too. Scottish Mortgage Investment Trust (LSE: SMT) is a prime example of this. The high-growth trust performed well in 2020 and 2021 but has fallen over 36% so far in 2022. Widening this timespan to 12 months, and the shares have fallen an equally disappointing 39%. So, currently sat at 822p, is the stock a bargain buy? Or should I steer clear of Baillie Gifford’s flagship investment trust? Let’s investigate.

The story so far

To understand why the stock has fallen, we must cast our minds back to the height of the Covid-19 pandemic. In an effort to remedy the economic shutdown, central banks across the world poured billions into economies to keep them afloat. At the same time, the virus disrupted supply chains. This meant there was less supply, but people had more money (on a macro scale) to spend on the same goods. The result of this – rising prices.

Fast forward to 2022, and inflation has been reaching sky-high levels. To make things worse, the tragic Russia-Ukraine crisis has sent energy prices soaring, adding to inflationary pressures. Now central banks are faced with a new task: to slow down rising prices. They do this by increasing interest rates.

When interest rates increase, investors withdraw their money from higher-risk, speculative assets like growth stocks, and put them into safer assets. This is because they can earn a better risk-free rate. Interest rates in the UK and US have been on the rise recently, the former sitting at 1.75%.

Scottish Mortgage’s main holdings are exactly the type of stocks that are being negatively affected by this kind of market. For example, its top two holdings Moderna (8.3%) and Tesla (6.7%) have fallen 39% and 28% so far in 2022. Many analysts are predicting inflation to keep rising, which likely means that rates will too. If this does happen, it would be bad news for Scottish Mortgage shares.

A long-term play

Here at The Motley Fool, we are long-term investors. That means picking quality stocks and holding them for up to 10 years. Scottish Mortgage operates with the same thesis. It looks to “add value over five-year time frames, preferably much longer” and explicitly states that it doesn’t “add much more than anyone else in the short term”. So, perhaps I should be discounting the current volatility, and be operating with more of a long-term view, trusting the fund’s management.

I only have to check on the trust’s previous returns to see this management in action. Over the last five years it has returned 118%, and over the last 10 years, a whopping 606%. This vastly outperforms the FTSE All World Index, which is the stock’s benchmark.

Am I buying?

I’m not buying just yet though. I think in today’s macro climate, a growth-focused trust is too risky for me. However, I will be keeping this stock on my watch list as I think it could have the potential to yield some big returns over a 10-year span.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended 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 share price is on the up! Here’s why I’d buy

Charlie Keough — Wed, 10 Aug 2022 09:45:00 +0000

This year has been dire for Scottish Mortgage (LSE: SMT) shares. After a modest 4% rise in 2021, 2022 has seen the stock come tumbling down due to inflationary pressures. Year-to-date, Scottish Mortgage fallen 32%. The last 12 months have shaved 36% off its value.

However, the trustâs investors will be delighted with the last month as the stock has risen a solid 13%. Hereâs why Iâd buy the trust today.

The story so far

2022 has been far from easy for the trust.

The main contributor to the downfall of Scottish Mortgage has been the performance of its top holdings. This includes the likes of Tesla and Amazon. And with these stocks down 28% and 20% year-to-date, respectively, itâs clear to see why Scottish Mortgage has suffered.

The trust has a large focus on growth stocks. And these tend to fare the worst in volatile times as people opt for âsaferâ alternatives. As interest rates are hiked to combat inflation, investors are able to get better returns on risk-free investments. As a result, these growth stocks miss out.

However, the last month has seen the trust fight back against these pressures. A large driver behind this is the rally its top holding Moderna has made in the last couple of months. With this rise, some may be beginning to regain faith in Scottish Mortgage.

Where next?

So, after a turbulent year, where will the trust head for the rest of the year?

I’m not sure. And to be honest, Iâm not that fussed. The reason for this is because I buy for the long hold. Management makes it clear that Scottish Mortgage focuses on returns over a five-year period. While past performance is no indication of future returns, the last five years have seen the stock profit shareholders with a 109% return. This easily trumps the returns of its benchmark FTSE All World Index, showing the strength of the stock.

What I also like about it is the diversity it can provide for my portfolio. Under a single investment, Iâm gaining access to over 100 companies. For me, this is perfect. An added bonus is the access I get to unlisted companies, such as the exciting SpaceX. Such holdings make up over half of the trustâs portfolio.

Iâm also a fan of managementâs ability to pick out stocks ahead of the curve. After all, Scottish Mortgage did buy Tesla back in 2013 for $6. For all I know, it could have the next big thing already in its holdings.

The biggest threat for it is rising interest rates. These are expected to be hiked further as we head towards the end of the year. And this will only continue to dampen the performance of growth stocks.

Yet despite this, Iâd still buy today. With a long-term outlook, these short-term issues donât worry me. The trust has proven its potential over the last five years. And with the diversity it offers my portfolio, I think this fall presents an excellent opportunity to buy.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Foolâs board of directors. Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon 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.

Scottish Mortgage shares are back on the rise: is now the time to jump onboard?

Dylan Hood — Sun, 07 Aug 2022 08:57:50 +0000

Scottish Mortgage (LSE: SMT) shares have been suffering for some time. Year to date, the shares are down 29%, and over the past 12 months, they have fallen 33%. This disappointing performance came after a knockout year in 2020, where the stock rose over 106%.

However, things seem to be on the up for Scottish Mortgage shares, which have risen over 25% in the past month. With today’s uncertain macroeconomic outlook, is now the time to be buying the shares? Or should I avoid this high-growth index fund? Let’s find out.

Economic considerations

On Thursday, the Bank of England raised interest rates by 0.5%, to 1.75%. This has come after months of red-hot inflation, which peaked at 12.7% in June. Scottish Mortgage was able to ride the early wave of high valuations in 2020 and the start of 2021, but the interest rate hikes of 2022 seem to have burst this bubble.

When interest rates rise, people tend to pull money out of speculative investments like growth stocks and put them into safer assets like bonds. This is because they can achieve a higher risk-free rate of return. This is bad news for funds like Scottish Mortgage, as a large portion of their holdings is focussed on high-growth equities.

For example, its top 10 holdings include Tesla (6.7%), Moderna (8.3%), and Tencent (3.8%), all of which are classed as growth stocks. Higher rates have hurt these stocks’ lofty valuations and pushed the Scottish Mortgage shares down. As rates continue to rise to control inflation, the shares could face even more pressure.

Upward momentum

As mentioned, the shares have seen an impressive surge in recent weeks. This movement reflects the encouraging performance of some of the trust’s underlying assets. For example, biotech firm Moderna has risen over 35% since the start of June and makes up a hefty 8.3% chunk of the trust’s asset holdings.

I think the upward momentum reflects the firm’s top-tier management. Although past returns are no indication of future performance, the fund has generated a five-year return of 118% and a 10-year return of 606%. Both of these figures comfortably outperform the FTSE All World Index, which is the trust’s benchmark.

The trust also gives me access to companies that aren’t publicly traded. For example, Elon Musk’s SpaceX makes up 2.9% of the trust. This allows me to benefit from growth I couldn’t get on my own, which is an attractive opportunity. In addition to this, like any investment trust, I am gaining a stake in a wide array of companies and industries all under one investment. This helps my portfolio with diversification and reduces risk.

The verdict

Overall, I think now could be a risky time to buy Scottish Mortgage shares. Yes, the shares are well below their 2021 levels, and the trust has demonstrated excellent management historically. However, I think that rising rates could continue to hamper the fund’s performance, as it relies heavily on growth stocks. Therefore, this stock will remain on my watchlist for now.

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At 815p, are Scottish Mortgage shares a buy?

Charlie Keough — Wed, 27 Jul 2022 14:30:00 +0000

So far in 2022, Scottish Mortgage (LSE: SMT) shares have fallen over 35%, dwarfing the small 2% loss of the FTSE 100. The investment trust has been a top performer over the last decade, proving its worth to investors. However, a deflated economic outlook has seen it suffer year to date.

The last month has seen the stock recover some of its losses, rising 8%. With the shares trading for around 815p, is now the time to buy?

A tough year

The main reason for Scottish Mortgageâs underperformance this year is due to the type of stocks it holds in its portfolio. The trust targets high-growth companies, including names such as Tesla, Nvidia, and Tencent. And with inflation rising globally, 2022 has seen these stocks suffer.

Firstly, this is because the economic uncertainty caused by inflation tends to see growth stocks take the hardest hit as investors move their money from these riskier investments to âsaferâ value stocks.

Secondly, to combat inflation, interest rates are pushed up. With growth stocks tending to borrow big, in order to grow, this also means the debt on their balance sheet becomes tougher to pay off. Combined, this has seen the Scottish Mortgage share price suffer.

Not all bad news

Despite its struggles this year, Iâm still keen on Scottish Mortgage shares.

To start, instead of looking at the dip in its price as an issue, Iâm looking at it as an opportunity. The trustâs management team makes it clear that Scottish Mortgage aims to maximise returns over a five-year period. It uses the FTSE All-World Index as a benchmark for this. And safe to say, it’s outperformed this in the latest five-year stint.

As a long-term investor, this suits me. This focus nullifies any short-term headwinds. And the trust has proven this by surviving multiple crises such as the dotcom bubble and the 2008 financial crisis.

I am also drawn to Scottish Mortgage because of the diversity my portfolio receives from a single investment. The trust has a global portfolio, including unlisted shares, all for a cheap ongoing charge of 0.32%. For me, this is perfect.

One issue I see is its weighting in China. This makes up around 20% of Scottish Mortgageâs holdings. And with the country still struggling to keep a lid on Covid-19 cases, this could be an issue. Weâve seen the impact this has had so far reflected through supply chain concerns. Should this continue, this could drag the Scottish Mortgage share price down.

However, over the long term, I think its Chinese focus will bear fruit. Itâs the fastest growing economy in the world. And I have full belief in the management team to pick out future winners. While it may see the trust suffer now, from a long-term perspective this doesnât bother me.

At 815p, Iâd happily snap up Scottish Mortgage shares. Its investment strategy aligns with my needs. And the diversity it offers is a great boost for my portfolio. Trading for nearly half of its 52-week high, Iâd buy Scottish Mortgage now and hold for the years to come.

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

Are Scottish Mortgage shares good buys at 774p?

Dylan Hood — Mon, 11 Jul 2022 11:22:42 +0000

In the first seven months of 2022 Scottish Mortgage (LSE: SMT) shares have fallen over 40%. That’s around 10 times more than the drop in the FTSE 100 over the same period, underlining the disappointing performance. Over the past 12 months, the shares are down an equally discouraging 39%.

However, last week the shares experienced an encouraging 5% jump in value. Currently sitting at 774p per share, down almost 50% from its all-time high, is now the time for me to add Scottish Mortgage stock to my portfolio?

Why the trust has underperformed

The main reason why Scottish Mortgage shares have underperformed this year is the nature of the stocks it holds. The trust targets high-growth companies and aims to hold them for a minimum of five years to generate healthy returns. This strategy has worked well in the past, highlighted by an impressive 585% increase in the share price over this period.

However, 2022 has been characterised by rising inflation and interest rates. Rising rates put big pressure on the valuation of growth stocks, which soared in 2020 and 2021. This has caused investors to pull out of growth stocks and pour into safer value stocks. The performance of Scottish Mortgage’s top holdings has taken a hit accordingly. For example, Tesla (5.7%), NVIDIA (2.5%), and Tencent (5%) are down 37%, 47%, and 21% year to date. Although Tesla is up 9% over the past 12 months, Nvidia and Tencent are down 22%, and 34% respectively.

A buying opportunity?

2022 has proved a tough year so far for Scottish Mortgage shares. However, this volatility may only be a flash in the pan in the long run. As mentioned, the trust looks for value over a minimum five-year period – preferably longer – and its healthy past returns show the exceptional execution of this thesis. Therefore, perhaps I should be discounting the current volatility and adopting a broader outlook?

This situation seems especially prevalent in China, where Scottish Mortgage has about one-fifth of its holdings. Recently, Chinese stocks listed in the US have taken a hit due to tough regulatory rules. However, China is still a rapidly-growing economy, and having such a large stake in this growth could pay dividends in the long run.

Another positive about the fund is that it gives me access to a wide portfolio of companies all under one investment. In addition to this, I also get access to unlisted companies, like SpaceX, in which the trust holds a large position.

What I am doing now

Overall, I think that at 774p, Scottish Mortgage stock could be a great addition to my portfolio. Yes, there’s some short-term volatility that has beaten down the share price, but in my eyes, this offers me a chance to grab shares at a discount. The diversification and access to unlisted companies are big pluses too. Therefore, I’m seriously considering adding a position to my portfolio soon.

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