Buy Scot­tish Mort­gage for 15% less than oth­ers bought it a month ago

Pop­u­lar in­vest­ment trust trades at a very ap­peal­ing price fol­low­ing the re­cent mar­ket sell off


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 high­growth 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.

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