We would love to hear your thoughts about our site and services, please take our survey here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
So basically you hate everything that SMT invests in - so why are you here? Why do you hold it?
Tesla is about more than just cars. They've grown to where they are right now just on the back of cars. But Tesla has plenty of other opportunities - most notably in grid-scale energy storage.
I do not like the exposure to Chinese companies either. Nor Tesla, I think Tesla will be squeezed by established car companies. For me the best reasons to sell SMT are that the new manager is not the calibre of the old one. Also Baillie Gifford as a whole has being going wrong for a couple of years now. I have already sold MNKS, EWI and PHI because of inferior performance.
Lower-risk alternatives
If you think the driving forces around technology and disruption are set to reverse, SMT is not for you. However, if you think otherwise, the situation calls for patience. I would argue that as we face a more inflationary world, with more on-shoring of production and tighter supply chains, large-cap businesses with intellectual property assets and an ability to pass on extra costs to consumers will continue to thrive. In other words, the tech-enabled global brand platforms are precisely the businesses that might flourish in this new world.
Still, if you are yet to invest, perhaps you should wait for the discount to push out to 20%. Meanwhile, invest in a fund that actively benefits from market volatility, such as BH Macro or the Ruffer Investment Company, and move back into SMT once the mood shifts. If the fund’s focus on private, unlisted firms and its Chinese exposure still feels troubling, look at sister fund Edinburgh Worldwide, which has a more explicit mid- to small-cap tech and healthcare focus and is currently trading at a 13% discount to NAV.
2/2
A?t one point Scottish Mortgage (LSE: SMT) was the UK’s biggest investment trust by market capitalisation. It championed a generation of disruptors, ranging from Amazon to Tesla. But if you look at the investor bulletin boards, it is now the subject of much scorn and vitriol.
The most recent trading update showed that net asset value (NAV) total returns for the year to 31 March were -13.1%, compared with a 12.8% gain for the FTSE All World index. The share price currently trades at 692p, a 55% decline from its 1,543p peak. It’s now on a wide 16% discount to NAV (the average discount over the past year is 1.3%).
The struggle isn’t over
NOT YET TIME TO BUY THIS FALLEN STAR
Scottish Mortgage was hit by the tech crash. New investors should wait for the headwinds to ease
David Stevenson, ?Investment columnist
The headwinds facing SMT are unlikely to abate soon. The fund bet big on technology. Now, rising interest rates have triggered a sell-off in those growth stocks. There’s also the question of venture capital-style investments and what these are worth in today’s markets. At first, SMT found itself somewhat insulated from the growth stock sell-off because a large part of its portfolio was in unlisted private investments. Unquoted holdings represented 24.6% of the portfolio at 31 March, up from 20.2% a year ago. Initially, valuations for these companies weren’t hit as hard as the price of quoted stocks. That’s about to change. The current round of haircuts to valuations will be only the beginning of a long and painful process for many late-stage venture capital investments.
To be fair to SMT, there is a robust valuation system in place for these private companies. They are valued on a rolling three-month cycle (ie, roughly a third revalued every month), except for the half-year and full-year-end of the fund, or where there is a trigger event that indicates the fair value of the holding has changed, such as a funding round. I estimate we have at least another six months of cuts of anything between 10% and 30%.
Still, not all of SMT’s pain is external. Management has made some poor decisions, of which the big strategic mistake was a focus on Chinese internet platforms. One didn’t need a crystal ball to predict Tencent and Alibaba were in trouble with the Chinese government. That said, on pure valuation terms, firms such as Tencent are now some of the cheapest tech stocks on the planet (perhaps for a good reason).
So the rap sheet against SMT’s record is long and detailed. I can’t see the share price improving much this year. On paper this means I should sell my own holding, but I’m choosing to sit tight. The current portfolio is still unique. Unlike many global equity funds, there’s diversification between both public and private assets, while maintaining a continuing focus on global businesses that can grow as technology disrupts more and more sectors.
1/2