Scottish Mortgage Trust (SMT) has published strong annual results just as shares in the Baillie Gifford flagship complete their 30-month recovery from the 2022 growth crash.
News that SMT shares gained 26.8% in the year to 31 March, beating the FTSE World’s 18% gain, came as the shares hovered below their November 2021 peak of £15.28, having clambered from an April 2023 low of 628p.
In early trading, the shares firmed 0.6% or 8.8p to £15.28 exactly, having risen 54.5% in the past 12 months.
The advance has been propelled by SpaceX, Elon Musk’s rocket to satellite to artificial intelligence group to which SMT had a 19% weighting at the financial year-end, a valuable position as the company counts down to a $1.75trn flotation next month.
Fund manager Tom Slater acknowledged the risk of such a concentrated holding but stressed the long-term opportunity in SpaceX.
“SpaceX should no longer be thought of as an aerospace contractor but as a dual monopoly: the world’s dominant launch provider and a global connectivity utility with the potential for software-like margins. Though the launch vehicles generate the media attention, the valuation has been driven primarily by its satellite communications subsidiary, Starlink, which is building the kind of predictable, highly profitable revenue that the best software businesses aspire to. The difference is that its assets are in orbit and extraordinarily difficult to replicate. The acquisition of xAI brings a further dimension that the market is only beginning to price,” he said.
Chair Christopher Samuel said “the market has increasingly recognised the scale of opportunity presented by artificial intelligence (‘AI’), the infrastructure needed to support it, and the companies capable of using it to reshape their industries. We are therefore witnessing what may prove to be a once-in-a-generation shift in technology, with value being reallocated across the global economy. Periods of such profound change are often accompanied by volatility, but they have historically created significant opportunities for long-term investors.”
Our view
Matthew Read, senior analyst at QuotedData, said: “Scottish Mortgage has delivered a strong year – it has been a clear beneficiary of renewed enthusiasm for AI infrastructure and the small group of companies that may dominate the next phase of technological change. SpaceX, now by far the largest holding, was the standout contributor and is a reminder of what Scottish Mortgage is designed to do: give shareholders exposure to exceptional companies, including private businesses, that most investors cannot easily access.
“That said, this remains a portfolio that shareholders must be prepared to live with through uncomfortable periods. The five-year numbers are still scarred by the growth sell-off, and the managers are candid that parts of the portfolio have been hurt by the derating of software companies, competitive pressure in China and the fracturing of global trade. This is not a benchmark-hugging global equity fund, and it should not be judged as one.”
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