Scottish Mortgage Investment Trust (SMT) has done modestly well in the last two years as many portfolio companies have bounced back. After bottoming at 600p in May 2023, the stock ended the week at 880p as some of its constituent companies published relatively strong earnings.
However, SMT has continued to underperform the other popular technology funds in the market today. For example, it has risen by 15% this year, while the Invesco QQQ and SPDR Technology ETF (XLK) have jumped by over 24%.
Scottish Mortgage is a unique tech fund
Scottish Mortgage is one of the biggest technology funds in the UK market, with over £14.1 billion in assets. It is unique because of its structure. Contrary to its name, it has nothing to do with mortgages or banks.
Instead, the portfolio managers at Bailie Gifford have created a fund with some of the biggest private and publicly traded growth companies. 34% of the firms are in the tech sector, while 32% are consumer discretionary, followed by industrials, healthcare, financials, and consumer staples.
Scottish Mortgage is also unique because its portfolio companies are from around the world. It has ByteDance from China, Shopify from Canada, MercadoLibre from Brazil, and Wise from the United Kingdom.
The other unique thing is that a big part of the portfolio is in the privately owned companies, which often creates a valuation or a liquidity issue.
Additionally, the fund mostly trades at a discount to the net asset value (NAV). Data show that it is now trading at an 8.8% discount
Top SMT companies
Several Scottish Mortgage Trust companies have made headlines in the past few weeks. Tesla stock made news last week after it published a strong quarter, pushing its stock to a high of $270, its highest level since July 11. It has soared by almost 100% from its lowest point this year, making it one of the best-performing EV companies this year.
Scottish Mortgage also owns a big stake in MercadoLibre, which we have covered before here and here. Mercado is one of the fastest-growing companies in the emerging markets. It is an e-commerce firm that has expanded in industries like logistics and fintech. MELI’s stock has jumped by 149% from its lowest level in 20223.
SMT also owns Ferrari, a company that has become one of the biggest automakers in the world. Ferrari’s stock has jumped by almost 64% in the last twelve months, and is nearing its all-time high.
This rally happened after the company launched key vehicles this year, with F80 being its most recent introduction. F80 is the successor of LaFerrari, one of the most popular Ferrari cars in the last decade.
Scottish Mortage’s other big winner was Meta Platforms, a company that has surged and transformed Mark Zuckerberg into the third-richest person on earth. Meta has done well because of its investments in artificial intelligence, which has helped to offset its aging portfolio.
It is also a big backer of some of the most notable semiconductor companies like NVIDIA, Taiwan Semiconductor, and ASML. As such, it has exposure in the growing AI space.
Other firms that made headlines recently were PDD Holdings and Meituan, which did well after China launched large stimulus packages.
SMT also has a big stake in other well-known technology companies like Spotify, Wise, and Stripe.
Some SMT companies have not done well in the past few months. A big one is Kering, the parent company of Gucci, which has slumped after publishing several weak results and lowering its guidance.
Read more: Kering share price: here’s why Gucci parent is falling apart
The fund also owned ChargePoint, an EV charging company that has struggled in the past few years.
It also owns ByteDance, which is being forced to sell its TikTok in the United States. The company could benefit if Donald Trump wins the general election.
The SMT fund has underperformed the S&P 500 and QQQ funds because of its exposure to privately and publicly owned companies. Some of these firms like Northvolt, Ocado, Kering, and Heartflow.
Scottish Mortgage Trust analysis
SMT chart by TradingView
The daily chart shows that the SMT stock price bottomed at 733p in August, and then bounced back to 880p, its highest point in July 17. It has risen above the 23.6% Fibonacci Retracement point.
The fund remains above the 50-day and 200-day Exponential Moving Averages (EMA). The Relative Strength Index (RSI) and the MACD indicators have all pointed upwards, meaning that it is regaining its momentum.
Therefore, the Scottish Mortage share price will likely continue rising as bulls target the next key resistance point at 945p, its highest point this year. This view implies a 7.65% increase from the current level.
The fund will likely react to earnings from some of the biggest constituents in the next few weeks. Some of the most notable companies that will publish their earnings soon are Meta Platforms and Shopify.
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