Scottish Mortgage Investment Trust (SMT)

Couldn’t find another thread for this, if there is just transfer it over :+1:t3:

Anyone hold, or have any thoughts on SMT?

There’s a few of the pricier tech names I want in on but don’t want to overweigh my portfolio with them. Namely, Amazon, Alphabet, Tesla and the two big Chinese stocks Alibaba and Tencent.

After a bit of research this fund has been active since 1909, and has only failed to pay a dividend once in that time, still managing to pay even through both WW1 and WW2.

May look to start a position now with many of these stocks dropping from previous highs.

I have never invested in a trust (I’m a shares and ETFs guy, and big on company fundamentals).

How do you think about this investment? A constituent companies such as Illumina (DNA sequencing, intriguing) shoots up in value, will the SMT price follow? I vaguely recall from finance classes that the price movement is not “automatic” based on the value of the shares the trust holds, but fluctuates with the supply and demand, same as a share.

The other thing I know about trusts is that they are a bit expensive, normally above 1% fee.

Thank you for your thoughts.

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The price of a trust doesn’t need to match the value of its holdings. When you look up trusts you’ll either see a Premium or Discount to its NAV (net asset value). Lindsell Train for example was trading at a premium of over 50% for ages.

SMT’s holdings have changed a lot recently. Tesla is no longer their top holding. Clearly they cashed in when the price surged.

Long term holder here of SMT - still up around +48% on my investment.

It’s currently trading at a discount of -5.14% so could be a good time to dip in, if you are considering doing so.

In case you’ve missed it, here’s Freetrade’s info on investment trusts and funnily enough, they use SMT as an example: https://blog.freetrade.io/whats-an-investment-trust-c54d0e5925e4

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Like weenie I’ve been holding them for years, consistently good returns and decent fees.

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Out of curiosity, when did you buy?

Mostly 2015 and 2016. Last made a top up in 2018.

Okay interesting, thank you.

Had a wee look and they have outperformed the S&P on both the 2 year and 5 year charts.

I may stick in a small lump sum and like all my stocks hold long term.

There’s plenty of stocks in there I would like to own outright but this would give me more diversification again, with a trust that on paper has a proven track record :ok_hand:t3:

I hold SMT to, up 21% on my investment since Feb 2019. Bought it for exposure to some of the big tech names and liked the steeped in history aspect :smiley:

Good shout @weenie, not at that level for a good while:

On a similar vein the Polar Capital Technology Trust ( PCT ) now trades at a NAV discount of 8.35%.

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Got a small amount in and will keep topping up.

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One of my few actively managed funds. Have done superbly well in recent years with some very punchy weights in some high flying companies such as Amazon and Illumina.

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Given the general feel of smt’s holdings why no Microsoft?? Strange

So i wonder if someone could enlighten me to why SMT would buy their own shares? What is usually the purpose and whats the benefit? (im unfamiliar)

e.g:

Depends who you ask but broadly speaking it’s supposed to add value to shareholders as it reduces the shares in circulation (“supply and demand”).

Good read - https://www.investopedia.com/articles/financial-advisors/121415/stock-buybacks-good-thing-or-not.asp

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Berkshire Hathaway recently did the same. Think I read Berkshire felt they were trading at a discount to the assets held. So buying them was good value for that reason alone. And as mentioned above it reduces supply which is good for the share price.

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This is the same as a dividend, as mentioned above Berkshire have also consistently used buybacks rather than dividends to distribute cash (for efficiency) - hence why the cost per unit is so high.

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Yeah I was aware of the buy back scenario I was just curious if there was other reasons a company may do so, or SMT specifically. I assume in this case it’s a simple buy back as you both suggest.

Does anyone read Baillie Gifford’s Trust magazine? I only just came across it this week

Exert from it from James Anderson one of the SMT managers

There’s a law in markets that the more uncertain the situation the more fund managers feel the need to pontificate. This is especially the case when a crisis is extreme in nature and far beyond the expertise of financial analysts. Why? It’s partly because clients, savers and the media want answers, but that desire is minor compared with that of investors to prove that they are in control by taking some, perhaps any, action. This isn’t a good idea. As a trustee of Johns Hopkins University, I feel in privileged touch with public health issues. But even Hopkins does not know what will ensue in medical terms – let alone in stock market consequences. We must respect uncertainty, not preach. Stress and short time frames are not auspicious omens of intelligent action.

So our default position was inaction. Did that work? It’s easy to twist events with hindsight, but what follows is an attempt to convey what was on our minds in recent months.

March

Each March I make a trek across America from east to west. I’ve found this an excellent process to observe the profoundly different mentalities at work, to mix companies and academia and to end up thousands of mental miles from the grime, greed and arrogance of Wall Street and Washington.

On my way I did a Scottish Mortgage presentation in London. Panic was already in the air. Stocks were falling indiscriminately. The audience also assured me that Scottish Mortgage was bound to be severely affected because it had been for several months in 2008–09. All I could really respond was that panics happen but that parallels are often misguided – and that subsequent returns after the Great Financial Crisis meant that we were justified in enduring the dark days. But although we certainly accepted that there might be months of pain, there was already a parallel with 2008–09 that we thought similar or even more central. The central banks of the world would flood markets with liquidity and commit to low interest rates for as far out as they could see. The discount rate for stocks would be falling and the competition from bonds would be minimal. That matters.

By the time I reached California, the previously insouciant American attitude to the pandemic had changed. I cut short my trip but not before a last meeting at Tesla. That was fortunate as it had a deep influence on my perspective. Although it was clear that the short term would be an unanticipated struggle, it was equally evident that Tesla was far better placed to first survive and then flourish than its traditional competitors. The parallel was with Amazon in 2008–09: it mattered far less that sales temporarily slowed than that the business models of others would never recover. The electric revolution would outlast the pandemic.

April
[…]

Continues https://magazinebailliegifford.com/Trust41/investing-in-a-pandemic/

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