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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

Popular investment trust trades at a very appealing price following the recent market sell off
Thursday 18 Oct 2018 Author: Daniel Coatsworth

The global market sell-off has presented a good opportunity to pick up shares in popular investment trust Scottish Mortgage (SMT) for 15% less than they were trading only a month ago.

Its shares were caught up in the panic over rising interest rates in the US and slowing global growth, plus the fact that many of its holdings were trading on high ratings which makes them particularly vulnerable to large falls when the market turns.

We do not believe anything has changed to the companies inside its portfolio and so now is a great opportunity to buy a superb investment trust and hold for the long term.

Scottish Mortgage has a bias towards disruptive companies, namely ones with the right ingredients to shake up traditional industries plus create new ones.

Ten companies account for just over half of the portfolio by weighting. At the top of the pile is retailer Amazon which is arguably one of, if not THE, greatest company in the world at the moment in terms of its power and engagement with both consumers and businesses.

You also get exposure to various giant Chinese companies (Alibaba, Tencent and Baidu), plus some better-known names like Gucci-owner Kering and Inditex, one of the world’s biggest fashion groups.

Smaller positions include sports car expert Ferrari, engineer Rolls-Royce (RR.) and Intuitive Surgical, a robotic surgical systems maker.


While Scottish Mortgage has enjoyed a really good run, delivering 23.15% annualised total return over the past decade, it is important to note the trust is likely to go through periods of high volatility, just as it has done in recent weeks.

In addition to backing high-growth stocks on potentially high valuations, some of its holdings are facing political, social and governance headwinds. Disruptive companies tend to get a lot of attention and there are inevitably questions asked from multiple directions as to whether they are good citizens.

For example, Tesla – which is Scottish Mortgage’s fifth biggest holding – has been slammed for the behaviour of its chief executive Elon Musk and his failure to adhere to normal standards of corporate governance. Amazon has been criticised for the way it treats warehouse workers.

Scottish Mortgage’s fund managers benefit from deep relationships with investee companies, and so you can be reassured they have the power to engage with, and hopefully influence, businesses that may have some ‘delicate’ issues.

Fundamentally this investment trust will give your portfolio exposure to strong growth stories around the world, with low charges and a highly experienced fund management team. We rate it as a must-have for anyone in the accumulation phase of their investing career. (DC)

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