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Investors are always incredibly loyal Scottish Mortgage Investment Trust (LSE: SMT), despite a tough few years.
Many no doubt remember its halcyon days, when the FTSE 100-the technology-focused list trust has returned more than 500% in five years, and is holding on with hopes of a repeat.
Scottish Mortgage's share price has fallen by more than 50% in 2022. That was a bad year for technology but confidence fell more than heavy technology. Nasdaq index, which ended the year down 'just' by 28.39%.
Is everything cracked?
I took advantage of the crash and bought Scottish Mortgage shares in May and August last year. So far, I'm up 21.83%. Measured over 12 months, the shares are up 25.83%. That's respectable, but if you think about it, it's not good.
Scottish Mortgage typically holds between 50 and 100, mostly private companies. The benefit of targeting a disruptive technology sector through trust is that risk is spread. The downside is that investors will never get the joy of catching a big winner like Nvidia.
The chipmaker is one large company that owns 6.79% of the portfolio, up nearly 200% over 12 months. Scottish Mortgage investors are exposed but not sharing in the fun. They were also exposed to the woes of holding unlisted Swedish battery company Northvolt, which is now in liquidation.
That's why I only buy individual UK stocks these days, never cash out. I prefer to bet on wins and losses.
I buy mutual funds overseas, but mostly trackers. I recently realized that Scottish Mortgage is now the only actively managed fund I still own. Can it justify itself to me?
Manager Tom Slater has done moderately well despite the US stock market bull run, but not brilliantly. I S&P 500 is at a high after rising 34.37% in the last 12 months. Scottish Mortgages go a long way.
The stock did not do well
The Nasdaq is up 45.07% over the past 12 months. This means that Scottish Mortgages fell almost twice as fast during the 2022 crash, but rose at about half the speed of the recent boom. That is not enough.
I have shares in Legal & General Global Technology Index Trustcovering the same field. increased by 37.69% compared to last year. Also, Scottish Mortgage is very much left behind.
Many are concerned about the outlook for tech and the US. Consultancy Longview Economics has warned that the next few months could be difficult as the Federal Reserve struggles to deliver a soft environment and a knife-edge presidential election.
It suggests that “This bull run is due to a major pullback”. If it's right, Scottish Mortgage will undoubtedly face serious problems, but that's not my concern.
I don't sell stocks every time someone warns of a crash. Timing the market rarely works. Instead I buy and hold long.
But I find it hard to justify holding onto this, given its underperformance in both bullish and bearish market conditions. I think now might be the right time to take my small profit and sell.
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