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Scottish Mortgage (LSE: SMT) shares rose to the forefront of retail investors’ attention after a monstrous 106% rise in 2021. In 2022, the shares also generated a solid 11% gain, compared to the FTSE 100, which rose a meagre 1%.
However, so far in 2023, the story has been very different. Year-to-date, the shares are down 7%, and over the past year, they have fallen 12%. What’s more, the stock has tanked over 56% since its November 2021 high of 1,500p.
Currently sitting at 670p, does the tech-focused trust present a compelling buying opportunity? Or should I be looking elsewhere for high-growth stocks? Let’s investigate.
The trust in detail
Scottish Mortgage Investment Trust is a fund that invests capital across a broad array of equities, private assets, and fixed-income instruments. This is one thing I like about the stock – it allows me to spread my capital across numerous assets. What’s more, it gives me access to private companies, such as SpaceX and Bytedance (the parent company of the social media app TikTok).
The investment trust’s main focus is high-growth equities in the technology sector. This can clearly be seen through its top 10 holdings, which include names like Moderna, Tesla, ASML, and Amazon. Having access to all of these high-growth companies, all under one investment, is a big plus for me.
This being said, the current macroeconomic landscape does not bode well for growth stocks. Rising interest rates increase the cost of borrowing for companies, eroding profit margins and limiting their ability to invest in expansion. Additionally, inflation diminishes the purchasing power of consumers, reducing demand for new goods and services.
These economic conditions often lead investors to reevaluate their portfolios, favoring more stable investments over growth stocks, which tend to be riskier and vulnerable to profit squeezes during challenging financial climates. I blame the current rocky macro landscape for Scottish Mortgage’s disappointing performance so far in 2023.
Light at the end of the tunnel
Although the current macro environment may be against the investment trust, the recent Arm IPO across the pond could act as a catalyst for growth. Arm is a UK-based chip manufacturer that listed its shares on the Nasdaq earlier this month.
The IPO was well oversubscribed, and its listing gave the company a $60bn valuation. Although the stock has fallen since, this does show me there is a strong institutional interest in tech growth stocks, which is good news for Scottish Mortgage.
What’s more, a successful tech IPO has the potential to significantly boost the value of tech growth generating positive market sentiment. Again, more good news.
Is SMT a buy at 670p?
Personally, I like the look of Scottish Mortgage shares at the current price. Given the stock has been as high as 1,500p, I think there is plenty of room to grow. In addition to this, the positive Arm IPO has proved that tech stocks are still hot among the investing community. If I had the cash, I would be loading up on shares today.
