Scottish Mortgage: how three private investors have responded

by Kyle Caldwell from interactive investor |

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We asked readers to get in touch to give their take on the Scottish Mortgage sell-off.

Scottish Mortgage’s (LSE:SMT) share price is continuing to claw back some of the losses it sustained in recent weeks. The shares ended trading yesterday (16 March) up 2.4% at 1,186p, and on a discount of 4%. 

Earlier this week, the global trust was given a boost by one of its unquoted companies receiving a record $95 billion valuation. Stripe, the online payments processor, was previously valued at $36 billion last April. According to Numis, the investment trust analyst, Scottish Mortgage has a stake in Stripe valued at £139.8 million at the end of January, which equates to 0.7% of its net assets.

Scottish Mortgage’s share price sell-off started on 15 February, when trading at 1,415p per share. From peak to trough during this period (when the shares fell to a low of 950p early last week) the share price had declined by 30%.

At the time of writing, following its share price making up some ground, an investor that bought at 1,415p would now be sitting on a paper loss of 16.2%.

Scottish Mortgage has been caught up in the technology sell-off that has taken place since mid-February, due to its focus on disruptive companies that have a technological edge over competitors.

In addition, Numis says “concerns around valuation of its unquoted investments” has played a part in the volatility.  

While an uncomfortable period, shareholders will be reassured by the trust's strong longer-term performance numbers. In addition, it is a timely reminder that Scottish Mortgage is an adventurous option for investors due to how it invests and that short-term periods of volatility are to be expected.

We asked readers to get in touch to give their view on the sell-off to find out whether they have been ‘buying the dip’. Here’s how three private investors have been responding.

 

I sold some shares, but then bought back

I am a long-term holder of Scottish Mortgage. The substantial share price increase over the last year has been concerning. 

I sold part of my holding at 1,380p but recently bought back at an average price of around 1,050p, reinvesting the sale proceed to increase the number of shares held.

The main reason for buying the shares back, apart from the rapid fall in the share price, was the substantial discount which opened up.

I remain a long-term holder and would consider increasing the holding should we see similar sell-offs like those witnessed recently. 

Damian

 

Continuing to hold

SMT holding is about 12% of my portfolio. Trust the management.....encouraged by investment in Norvolt. Good forward thinking. And, I think the US stimulus package will prompt better overall trading worldwide.

Michael

 

Tesla froth led me to sell

If any holding doubles its value within 10 months based on the froth around one company with the most ridiculous valuations, then it is always time to 'sell too soon'. So I did, in January. 

Just as I sold a third of my holdings last year in early February and dipped back in at the depths. It was hardly rocket science that Covid-19 was going to play havoc, except to the British government. Or that there would be a rally. Nor was Scottish Mortgage's slump a shock. 

Sadly, my holdings aren't of a size that will enable me to buy a Tesla (NASDAQ:TSLA), but one can but hope.

John

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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