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

Lee Wild from interactive investor

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.

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