Investors holding Scottish Mortgage Investment Trust (LSE: SMT) shares have been put through the wringer over the past few years.
The share price doubled between early 2020 and 2021, before falling heavily when Covid struck. Then it surged 50% to reach an all-time high of 1,528p in November 2021.
This was followed by a 60% slump over 18 months as higher interest rates sparked a sell-off in growth stocks. Since then, it has jumped 44% to reach 900p.
Should you invest £1,000 in Scottish Mortgage right now?
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This is not one for the faint of heart and investors could be well up or deep in the red, depending on when they bought shares of the FTSE 100 trust.
Here, I’ll look at how much someone would have if they’d invested £5k at the beginning of 2024.
Blink of an eye
Scottish Mortgage shares started the year at 808p and are now trading for 900p. That translates into a gain of 11.4%, which is just over double that of the Footsie (5.4%).
That means a £5,000 investment would now be worth £5,570 on paper. Not bad.
Now, it should be noted that a few months is a mere blink of the eye for Scottish Mortgage. It invests in firms it believes can grow rapidly for a decade or more, and asks to be judged over this sort of timescale.
So, how’s it done over the last 10 years? Well, very impressively. Up to 31 March, the net asset value per share increased by 382% on a total return basis versus 218% for the FTSE All-World Index (its benchmark).
That would have turned £5,000 into £24,100 in a decade. Very nice.
And while the trust doesn’t pay big dividends and yields just 0.5%, it’s still managed to up its payout for 42 consecutive years.
Encouraging portfolio progress
Scottish Mortgage has been boosted by the very strong performance of its key holdings over the past year. Chipmaker Nvidia has rocketed 209%, while shares of ASML, Netflix and Spotify have risen 42%, 55% and 95%, respectively.
Meanwhile, private holding SpaceX recently sent Starship, the world’s largest rocket, into orbit. It even pirouetted and landed itself upon return. A fully reusable Starship would be a revolutionary advance in spaceflight, solidifying SpaceX’s dominance in the field of low-cost satellite launches.
The company is now worth around $200bn, making it the world’s most valuable private company alongside ByteDance (another holding). SpaceX’s satellite internet business, Starlink, achieved cash flow breakeven last year and could be spun off by 2025.
For context, Scottish Mortgage first invested in SpaceX in 2018 when it was valued at about $30bn. So it’s sitting on some very large unrealised gains.
I’d happily invest
Also, the trust announced a mammoth £1bn share buyback in March to run over two years. This should help support the trust’s share price while boosting the net asset value per share.
One risk here is the heavy concentration in the portfolio, with about one-third invested in firms linked to artificial intelligence (AI). If the AI revolution is a bubble, as some fear, its bursting could hit the trust hard.
Long term though, I’m excited about the massive growth potential of Scottish Mortgage’s holdings. And I’d feel comfortable adding the stock to my portfolio at 900p if I didn’t already own it.
