Interactive Investor

Scottish Mortgage investment trust: prospects for 2024

Analyst Thomas McMahon explains what he thinks is needed to trigger a sustainable improvement in the share price and whether that could happen in 2024.

20th December 2023 15:10

by Lee Wild from interactive investor

Share on

Despite a difficult couple of years, Scottish Mortgage (LSE:SMT) is still one of the most popular purchases among retail investors. Investment trust analyst Thomas McMahon explains what he thinks is needed to trigger a sustainable improvement in the share price and whether that could happen in 2024.

Lee Wild, head of equity strategy, interactive investor: Hello. With me today I have Thomas McMahon, investment trust research manager at Kepler Trust Intelligence. Hi Thomas.

Thomas McMahon, investment trust research manager at Kepler Trust Intelligence: Hi Lee.

Lee Wild: Scottish Mortgage remains one of the most popular and widely owned investment trusts. 2022 was a tough year. 2023 hasn't been any better. So, what's needed to trigger a sustainable improvement in share price? And could that happen in 2024?

Thomas McMahon: I think that Scottish Mortgage’s portfolio is extremely active versus a global benchmark and it's got a lot of very idiosyncratic situations in it. So, probably what the portfolio really needs is some good news and some good results for some certain specific companies in the portfolio. I think that's going to be more meaningful than a growth versus value-type rally, which I don't think is going to quite hit the spot anymore.

So, if you think about the Scottish Mortgage portfolio, it has companies like Bytedance, which owns TikTok. Very politically debatable controversial company in the middle of the Chinese and US trade and political confrontation. It's got Tesla (NASDAQ:TSLA), which is a bit of an enigma. How is it going to handle the growing competition in electric vehicles?

It's got space exploration, SpaceX, it's unlisted. It maybe made a small profit in the first quarter, but not a lot of information, possibly just losing money. And, you know, it’s a pioneer. So, there's a lot of idiosyncratic situations.

One thing that's coming up is the rumoured IPO of Northvolt. It's just a rumour at the moment that the company is considering an IPO next year. It is Europe's leading electric vehicle battery manufacturer. So, if you were to get, say, a very strong IPO price for this unlisted investment, which Scottish Mortgage and a number of Baillie Gifford funds hold, that could not only have a good effect on the NAV, but it might bring some confidence back to the private market valuations.

Because if there's anything systemic that is affecting Scottish Mortagage at the moment, it's probably wariness about the 30% of the portfolio that's unlisted, there's still a lot of wariness about valuations. And so maybe something significant like a large IPO could change sentiment there. So, I think that's probably more the sort of thing that we need to look for. And could it happen? Absolutely, it could happen. But I don't know what will happen next year for sure.

Lee Wild: Fingers crossed. Thank you. Thomas McMahon, investment trust research manager, Kepler Trust Intelligence, thanks very much for joining me today.

Thomas McMahon: It's a pleasure.

Lee Wild: And thank you for watching. And make sure you subscribe to the interactive investor YouTube channel.

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.

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

Get more news and expert articles direct to your inbox