Scottish Mortgage Investment Trust Update: Net Asset Value Discount Narrows

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Scottish Mortgage investment trust (LSE: SMT) (one of the components of the MoneyWeek investment trust portfolio) continued to trade at a discount to its net asset value (NAV, otherwise known as the value of the underlying portfolio) in March this year.

But the discount narrowed slightly from 0.7% to 0.5%, suggesting that the trend of an increasing discount may be reversing. The trust typically trades at a premium to its net asset value, but its stock price has fallen each month from November through February.

Despite the narrowing of the discount, the trust’s share price has continued to fall in recent days as investors dumped growth stocks in favor of value stocks.

Tech stocks, which have come under pressure from rising interest rates and a more hawkish stance from central banks, are a key part of the trust’s holdings.

SMT holdings are risky

Since the trust has lost about 30% in the six months, investors may consider the stock to be cheap. But James Fox in the Motley Fool is still urging investors to exercise caution and “reconsider the valuation of Scottish Mortgage”.

Some of the trust’s holdings are overvalued, Fox says. The value of Moderna, a leading vaccine producer during the pandemic, is uncertain as its profits are expected to fall from $12 billion in 2021 to just $2 billion in 2024 once demand for Covid-19 vaccines is expected. dissipate.

He also questioned the value of other stocks that loom large in confidence, such as electric car maker Tesla, which reached a valuation of $1 billion late last year, and Chinese technology company Tencent.

“Tencent is also a major stake and the Chinese company has reported declining revenue growth in recent years,” Fox said.

But there’s no denying that the trust has had a very impressive track record so far. The SMT is up around 638% over the past ten years, compared to just 232% for the FTSE All-World Index, the trust’s benchmark.

An overview of SMT’s top ten holdings

Moderna remained the company’s largest stake, rising from 6.3% to 7.1%.

Tesla fell from fourth to second place, accounting for 6.6%.

French luxury company Kering fell from eighth to ninth place, accounting for 2.4% of trust. The trust retained all of its trust holdings in March that it held the previous month.

Biotech company Illumina jumped from third to fourth position, while US multinational tech companies Nvidia and Amazon retained their sixth and seventh spots respectively.

Chinese shopping platform company Meituan rose from ninth to tenth place, accounting for 2.3% of the fund. This represents a decline of 0.2% from February levels.

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