Scottish Real Estate Investment Trust (LSE: SMT) is the successful fund managed by Baillie Gifford. Remarkably, it was first launched in 1909, and is today the largest investment trust in the FTSE 100. But recently, the share price of the Scottish mortgage has fallen. Already in 2022, the fund lost more than 14% of its market value. It’s down over 7.5% in one year, too.
what’s going? Does this weakness give me a chance to buy?
Why is the Scottish mortgage share price dropping?
I think the recent weakness in the Scottish mortgage has to be adjusted against its strength over a longer period of time, in particular. Since the end of 2019, the fund is up almost 100%. If I’ve had the confidence this whole time, I’d be very happy to come back. But this outperformance during the pandemic may also be the reason for the stock price’s drop this year.
With this in mind, the first thing I do before buying any box is to check out the latest fact sheet. You should tell me what the investment strategy is, and show the 10 biggest holdings inside the fund. Scottish Mortgage’s latest fact sheet describes this as an actively managed global equity portfolio. Looking to realize returns mostly from higher stock prices over the long term. From here I can check the underlying assets to see that the fund is leaning heavily towards technology stocks, consumer appreciation and healthcare. For example, Trust Hold modernAnd TeslaAnd New And nvidia Involved.
I can now check the individual performance of these stocks in 2022. In fact, it wasn’t great. Moderna is Scotland’s largest mortgage hub and that stock is down nearly 20% in 2022. Nvidia’s stock is down more than 8%, and even Tesla, which is usually a darling in the stock market, is down 1%.
These companies have been doing very well in relation to the pandemic. Moderna in particular was able to develop a pioneering vaccine against Covid. Although, recently, there have been risks such as inflation, the possibility of higher interest rates, and over-valuation, affecting the prices of these stocks.
But does that matter in the grand scheme of things?
this is what I do
I do not think so. After all, Scottish Mortgage has been successfully picking stocks for over 100 years now.
For me, the main point to consider is the time horizon. The Trust’s strategy, as explained in the factsheet, says it aims to outperform FTSE All-World Index over a five-year rolling period. I shouldn’t care if stock prices fluctuate over a few weeks, and even more than one year, if I look at Scottish mortgage stocks long term. Managers have shown that they can pick good stocks for many years now, and the recent stock price drop doesn’t really change that fact.
Therefore, I would consider buying the Trust at this stock price. I have quite a bit of risk tolerance and I need this as the share price of the Scottish Mortgage could continue to fluctuate from here due to the issues I mentioned above. However, I consider this trust a high-quality potential addition to my high-risk portfolio.
Dan Appleby owns shares of Nvidia. The Motley Fool UK recommended Tesla. The opinions expressed about the companies mentioned in this article are those of the author, and therefore may differ from the official recommendations we provide on our subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, we believe that thinking about a variety of ideas makes us better investors.