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I Scottish Mortgage Investment Trust (LSE: SMT) share price has had a strong November. It increased by 9.2% compared to a profit of 2.2%. FTSE 100 index and 6.2% of Nasdaq. The stock is up 31% in one year.
What happened in November to promote this increase?
US election
At the beginning of the month, we won the election of Donald Trump. This sent the index higher in the US, where most of the growing Scottish Mortgage was listed.
Some analysts think that this result will produce “animal spirits” markets, and we are starting to see this. Both the S&P 500 again Nasdaq achieved new records in November.
A great catch as Amazon again Tesla performed very well, increasing by 11.5% and 38.1% respectively. In turn, this increased the performance of the trust.
A long time
Next, we had Scottish Mortgage’s half-year results on 8 November.
At first glance, this was not very exciting. Between March and September, net asset value per share (NAV) increased by 1.9%, compared to a rise of 3.6% FTSE All-World Index (its benchmark).
In other words, it failed to perform well during that period. However, the trust managers are asking the shareholders to judge in five years or more.
In all these long-term periods, things are looking much better.
| Time* | Growth in Scottish Mortgage NAV | Index growth |
|---|---|---|
| 5 Years | 88.9% | 66.9% |
| 10 years | 347.8% | 211.3% |
Now, the fund is still trading at a discount to NAV. In an attempt to mitigate this, it bought back £880m of its shares during that period.
Progress has been made, as the discount now stands at 9.8% compared to 16% last year. The purchase will continue, but there is debate as to whether this is the right move.
After all, there is a risk that the discount increases, without repurchases. As a shareholder, I would like to use the money from the Scottish Mortgage to make other investments.
Reducing Nvidia
The big news during H1 was that the position in the AI chipmaker Nvidia was reduced.
Manager Tom Slater wrote: “The biggest challenge hindering the adoption of AI on a large scale is still the high cost. Companies must find ways to provide competitively priced AI systems while managing rising training costs. This raises concerns about the sustainability of current spending, including Nvidia chips.”
Nvidia stock has been a big winner since the trust started investing in 2016. I’m glad it’s locked in some benefits, while I still keep it as a top five.
Northvolt and SpaceX
However, the private sector side of the portfolio disappointed, falling by an average of 11.3% over the period. This hit the NAV by about 3%, which was the main driver of the underperformance.
Northvolt, the Swedish EV battery maker, has collapsed. The recall is disappointing for Europe, as it will increase reliance on imported EV batteries, including from China.
Can other private things go under? It is possible.
In better news, the value of SpaceX is on the rise and is now the third largest holding in Scottish Mortgage. It introduced the more affordable Starlink terminal, while its massive reusable Starship rocket is making dramatic improvements.
The age of AI
The trust’s portfolio is full of AI innovators, and it says “understanding what is being said” of this revolutionary technology will be “the work of the next decade“.
This exercise is important to many stock pickers, I would argue. Many industries may be disrupted.
Overall, I’m happy with my position size, but I think investors may want to consider Scottish Mortgage shares today.
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