Scottish Mortgage Investment Trust (LON:SMT) is down a further 10% today (Tuesday 23/02/21) after a sharp fall yesterday. I can not find whether NAV has fallen commensurately.
Does anyone know what is going on?
A retired lawyer, living off state pension, annuities, and my SIPP via one off income draw downs.
They sold about half the Tesla holding in January 2021. But now too much exposure to Chinese companies now for me, Tencent, Nio and Alibaba are among the largest holdings.
Graphs are deceptive when the scale doesn’t highlight enough range for what’s being shown and the detail needed not necessarily baked in. All I’m saying is if SMT falls more than the Tesla which is the biggest falling stock it holds it must be trading at more of a discount. If you look at the Morningstar NAV vs Price it shows a different pic to HL. Discount is lower than it has been and the best graph to show is the discount / premium graph on it’s own scale. Currently near -4% but over last 5 years only ever dipped below that level once where it hit -5%. Normally trades at premium for me Tues lunch it probably traded at -10% on intra day. The share suddenly is at a low point on its recent historic premium / discount is all I’m highlighting.
I am a holder of Scottish Mortgage Investment Trust (LON:SMT) and have been for a couple of years now. This podcast really cemented my belief in these guys. Specifically the part when they tell of how they can get access into rooms of small innovative companies early on because of their reputation. Also, they are not interested in quick bangs and scarper. They want to build up long term uplifts over years not months. Yes they got very lucky last year with Amazon and Tesla, but they are probably holding the same in their smaller unlisted holdings as we speak.
I have removed my Stop Loss for Scottish Mortgage Investment Trust (LON:SMT)
I was worried the 10% drop last week would turn out to be a shakeout and the bullish Nasdaq trend would continue. Looks increasingly like a correction in US tech. Glad I sold out. Longer term will look to re-enter. I must admit my portfolio is lacking any real direction now. Approx 60% in Cash after selling SMT, EWI.
Scottish Mortgage Investment Trust (LON:SMT) is down 28% from the peak only 3 weeks ago. Is it just a very deep pullback or the beginning of something more serious? Here’s how the current pullback compares to previous drawdowns of 20% or more in the last 20 years:
| Peak | Bottom | Back to breakeven | Duration in months | Max drawdown |
| Mar-01 | Mar-03 | Mar-06 | 71 | 58.87% |
| Sep-07 | Jan-08 | Apr-08 | 7 | 21.35% |
| Apr-08 | Nov-08 | Dec-10 | 31 | 63.63% |
| Jun-11 | Dec-11 | Jan-13 | 18 | 28.03% |
| Apr-15 | Feb-16 | Jun-16 | 15 | 22.72% |
| Aug-18 | Oct-18 | Aug-19 | 12 | 23.58% |
| Feb-20 | Mar-20 | Apr-20 | 2 | 31.71% |
Surprisingly we're in the 4th worst pullack this century, behind only The dot-com bubble, GFC & Covid crisis. If you bought at 28% down in Mar 2001, you'd be looking at further 43% drawdown and 61 months to get back to previous peak. Similarly, in 2008 there was a further 50% drawdown and 27 months wait. What is more, 2001-2010 was pretty much a lost decade for Scottish Mortgage Investment Trust (LON:SMT) - from the peak in Mar 2001 to the through in Dec 2011 the price increased by only 10%.
However, unless you believe we're in early stages of another really bad bear market or a lost decade for technology stocks, there are reason to be optimistic. All four pullbacks since GFC were fairly shallow (22.7-31.7%) and took a reasonably short time to recover from - on average of just one year. Buying at current levels offers potential profit of 38% just from recovering back to February peak, possibly within a year. Personally, I still hold my core position from last year and I was buying more on the way down (I only do this with funds, never with individual stocks), including today. Time will tell if this gamble pays off.
Scottish Mortgage Trust holds about 16% of investment in Tesla, which has fallen in price massively
It was the top story in my financial pop-press news this morning https://www.thisismoney.co.uk/...
Looking at the chart, volume has been extremely high on at least 3 recent down days, sometimes 3x average daily volume. This gives credence to the 'rotation out of tech' story. It's possible that IT holders tend to react more slowly than single stock holders and we could see continued falls next week with an increasing discount (on the other hand, IT holders may be more 'in it for the long term' and steadier hands?). It's notable also that the tech fall in the East looks as sharp as in the US, so international diversification hasn't really helped.
Where will it end? I wouldn't be surprised if it slices through the 1,000 p level given the downwards momentum. Some on advfn talked of buying if the upper 800s are reached. But that's taking us back only to July 2020 levels. Perhaps low 700s would be a more reliable support, being just after the initial bounce-back from the covid dip of March yet before the huge surge in tech valuations started. Some of the frothy US stocks are down over 50% from their local highs.
There was an interesting chart in Jamin Ball's Clouded Judgement email yesterday that showed an EV/Next 12 Month Revenue of 36.9 for the 5 highest rated SaaS businesses. Astounding that this is, it was almost 70 a couple of weeks earlier!
PS I found Slaya's analysis of dips fascinating. This suggests to me it could well be 2 years before the recent highs are regained with no great rush to get back on the train.
Looking at the chart, volume has been extremely high on at least 3 recent down days, sometimes 3x average daily volume. This gives credence to the 'rotation out of tech' story.
Well, if you're going to trade an IT then Scottish Mortgage Investment Trust (LON:SMT) is as good as any. Its future tech focus guarantees volatility. But the historical record doesn't tell the whole story - really it's only been a focused future tech trust since around 2014, the comparative data before that is fairly meaningless.
As far as I can see you can treat SMT in one of two ways - either as a valuable diversifier in a broader portfolio to be left to do what it wants or as a high risk option in a smaller one, to be watched like a hawk. I incline to the former, clearly a lot of people here to the latter.
More broadly the "rotation out of tech" story is only a facet of a rotation into value as we hopefully face the impending reopening of large parts of the economy. Many tech stocks are clearly overvalued as increasingly dumb money has been chasing momentum - but simply lumping all tech stocks together doesn't really make any sense. In what way is Zoom related to Pelaton or Facebook to Apple or Tesla to Paypal? The future trajectory of these companies will depend on their performance, not the group zeitgeist.
Anyway, as John Kay puts it:
The other approach — of which Scottish Mortgage has become the standout example — is to pursue a style derived from a well articulated investment philosophy. Importantly, such a strategy is based on a view about business, rather than a view about assets or markets, and on a view about the future of particular firms and products, rather than a macroeconomic prediction about the future policy of the Federal Reserve Board.
https://www.johnkay.com/2020/0...
If the SMT management is correct then the share price of the trust will be far, far higher in a decade. If not it won't be. And rotations in or out of tech over the next few months won't make the slightest difference to that outcome.
timarr
Scottish Mortgage Investment Trust (LON:SMT) going down to low 700s would mean roughtly halving in value for all companies in the trust - this is simply not realistic without a very significant catalyst. Many companies in portfolio have substantially stronger fundamentals than the last time the price was in 700s (prime examples are Moderna and Zoom). As to IT holders reacting more slowly - present discount to NAV of over 11% suggests the opposite. In fact, the discount is currently almost as deep as mid-March last year, which could mean that the panic is close to the peak.
Herbie47 is right, $Tesla is down 33% but it's only 5% of the portfolio, so it's only responsible for 1.7% out of 28% drop of £SMT. It's the indisctiminate sell off of growth stocks across the board combined with sell off of Scottish Mortgage Investment Trust (LON:SMT) itself (currently at 11.3% discount). Growth stocks with good fundamentals will come back, a lot of excess seen in last months won't (i.e. SPACs or no profits/no revenue junk).
It's from morningstar. I might be wrong but I think BG only update discount/premium once a day when they publish NAV. Morningstar on the other hand shows Friday's closing price vs. latest NAV hence is more up to date.
The AIC's "analyse investment companies" page shows Scottish Mortgage on a discount of 11%:
https://www.theaic.co.uk/aic/analyse-investment-companies
But the AIC's "company data" page for Scottish Mortgage shows a discount of 5%:
https://www.theaic.co.uk/companydata/0P00008ZPP
I'm inclined to believe the 11% figure following the further 6.5% fall in the share price of Friday.
Scottish Mortgage Investment Trust (LON:SMT) has a lot of big positions in stocks with very high P/E Tesla (934) NIO (loss making), Illumina (89) ASML (75) and probably others. Those are not attractive fundamentals and prices probably have further to fall. I’ve never understood the hype about about these new entrant EV players, EVs are easier to manufacture than combustion engined cars. The established car makers simply delayed rollout due to lack of profitability. VW is now the dominant EV car maker in Norway, which probably has the most mature EV market due to tax incentives and abundant hydroelectricity. The transition to EV will likely hit car dealerships hard as they require a lot less maintenance, hence why TESLA does not have a franchised dealer network.
Have reduced a significant , long held holding in SMT over past month. Have a monthly drip feed in place starting in May and limit orders from 780 to 500. The "bet" is management rebalancing , irons out potential clangers..e.g Tesla and the unquoted p/folio holds enough gems to offset a dampening of mkt enthusiasm for tech based IPO"S. Its a true conviction stock ..my kids love it !
Well done, Swanmore! I too reduced but earlier than you so missed out on the 'blow off top'. Today is another high volume down day. As John Authers appears to note this morning, momentum is one of the big unexplained drivers of stock prices in developed markets. Sector rotation I suspect is a fairly slow momentum effect so I wouldn't expect it to reverse abruptly. Obviously part of the problem is that a rise in long term discount rates will slam companies whose projected earnings are weighted to the distant future - so FB, GOOG etc with strong immediate earnings haven't been hit as hard as the blue skies. My big concern is that with the general over-valuation in the US a tech crash could trigger a general market crash - maybe 2000 is etched too deeply in my mind!
As an aside, Porsche (VAG owned) today upping its Rimac stake to 24% will be another pointer to the 'trad' auto-makers fighting back against the likes of TSLA.
Meanwhile, the ebullient Cathie Wood remained in 'buy the dip' mode a couple of weeks ago. I can't wait for her next update (due later this week?):-
Yes I noticed that Morningstar figure also thanks for confirming - I suspect there is a trail on the NAV though as they probably need that from BG either way today it swung down to around 950p and then back up 10% from that low. The discount is swinging wildly - also shows on BG how far the price drop is down to the change to the discount and it accounts for almost half the total loss. Underlying NAV hasn't changed so much so sell off is betting on an ever increasing opening discount. I'm holding on to mine as good company, good track record not a time to panic.
