Kyle Caldwell from interactive investor 26th January 2022:
Should investors hold, fold or buy or more?
History is repeating itself for the UK’s largest investment trust, Scottish Mortgage Ord, which has once again seen its share price fall sharply on the back of a sell-off in growth and technology stocks.
Year-to-date Scottish Mortgage’s share price is down 19.4%, as of close of trading yesterday. It is trading on a discount of 3.3%, according to analyst Winterflood. The trust’s board actively buys back its own shares in an attempt to keep its discount under control.
Last year, from mid-February to early March, Scottish Mortgage’s share price fell 30% peak to trough, due to a sell-off in technology companies…
Scottish Mortgage backs disruptive companies that have a technological edge over competitors. It also has a sizeable position, just under 20% of its assets, in unlisted companies. Many of these companies are at an early stage of development. Therefore, when there’s a heavy sell-off in tech companies, Scottish Mortgage is negatively impacted.
In contrast, when tech shares are in favour, this provides a boost to performance. In the 12-month period to the end of March 2021, Scottish Mortgage posted the strongest ever yearly return in its 112-year history, with its share price up 99%.
James Carthew, head of investment companies at QuotedData, says: “The onset of the pandemic supercharged the performance of Scottish Mortgage as investors looked for companies generating their own growth rather than relying on the growth of the wider economy; also as a whole class of companies saw an acceleration in revenue because they offered solutions that supported economies affected by social distancing measures.
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