What’s going on with the Scottish Mortgage (SMT) share price?

January 25, 2024 07:44 AM PST | By Invezz

What’s going on with the Scottish Mortgage (SMT) share price? — Image source: Invezz

The problem with SMT

The Scottish Mortgage Investment Trust is a leading fund that tracks some of the biggest technology companies in the world. While most of its portfolio companies are publicly traded, it also owns several private firms like Northvolt, Bytedance, and Zipline.

The biggest companies in Scottish Mortgage are companies like ASML, Amazon, Tesla, Ferrari, and PDD Holdings. All these are quality firms that have a substantial market share in their industries. For example, Ferrari is the premier luxury vehicle company while PDD Holdings is growing at a fast pace.

Most of the companies in Scottish Mortgage have done well in the past 12 months as the tech industry booms. For example, ASML stock price has jumped by 30% as demand for semiconductors has jumped amid the AI hype.

Amazon, a member of the Magnificent 7, has risen by over 60% in this period while Ferrari has soared by 37%. Not all companies in the fund are thriving. For example, Tesla and Nio are under pressure as the electric vehicle industry implodes.

The challenge for Scottish Mortgage is that it has constantly traded at a significant discount to its Net Asset Value (NAV). It now has an 11.7% discount to NAV, meaning that the stock is trading at a cheaper price. In this case, the NAV at fair stands at 862p, meaning that investors are not receiving the full value.

The other challenge for Scottish Mortgage is that it still holds several private companies in a period when the IPO market has cooled. There have been no major IPO in the past few months. Further, I have questions about some of its portfolio companies like Joby Aviation, Moderna, Nuro, and Solugen.

Is Scottish Mortgage a good investment?

In my last article on SMT, I recommended staying away from the fund and instead allocate cash on generic tech ETFs like Invesco QQQ (QQQ) and Invesco Nasdaq 100 (QQM) ETFs. These are quality and cheap funds that track technology companies across the board. They are also highly liquid and have a history of performance. QQQ has jumped by more than 60% in the past 12 months.

Turning to the daily chart, we see that the SMT stock price has been in a strong uptrend in the past few months. In this period, it has constantly remained above the key resistance point at 740p and the 50-day moving average. Therefore, the fund will likely continue rising as buyers target last year’s high of 815p. Nonetheless, other ETFs like QQQ will likely do better than that.

The post What’s going on with the Scottish Mortgage (SMT) share price? appeared first on Invezz

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