The Scottish Mortgage share price doubled in 2020: should I buy now?

first_img I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. “This Stock Could Be Like Buying Amazon in 1997” Simply click below to discover how you can take advantage of this. The Scottish Mortgage share price doubled in 2020: should I buy now? See all posts by Roland Head I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Tesla and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!center_img Roland Head | Sunday, 7th February, 2021 | More on: SMT Our 6 ‘Best Buys Now’ Shares The Scottish Mortgage Trust (LSE: SMT) is an unlikely name for an investment trust that invests in the best global growth stocks its managers can find. This strategy has paid off in recent years. The SMT share price doubled in 2020 and has risen by more than 450% since 2016.I have to admit I’m slightly in awe of the performance achieved by the trust’s managers. They’ve delivered massive gains by buying successful growth stocks such as Amazon and Tesla at an early stage in their development. I’ve been wondering if I should give up managing some of my own money and buy shares in SMT instead.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Why I might buyPast performance is no guide to the future performance of an investment. But SMT’s share price has risen by 1,200% in 10 years. This strong history of growth suggests to me the trust’s managers have a distinctive strategy that’s worked well for quite a long time.Checking the SMT website, I find the trust’s aim is to “add value over five year time frames, preferably much longer.” Interestingly, SMT’s managers believe that, over short periods, “we don’t see that we can add much more than anyone else.”So they appear to have great long-term vision about the potential of new business models. They also have the patience and discipline to stay with businesses through short-term problems.These attributes have seen Scottish Mortgage outperform the market for more than 10 years and grow into a FTSE 100 company. It’s an impressive result, but I think it’s worth considering what might go wrong.Is this a bubble?Scottish Mortgage’s growth has been impressive for years. But things really exploded after the market crash in March last year, when popular US tech stocks skyrocketed.The trust’s largest shareholding is in electric car maker Tesla. At the end of last year, Tesla stock accounted for 8.9% of SMT’s value. Chinese electric vehicle maker NIO is another top holding and represented 4.5% of the trust’s assets at the end of 2020.Tesla shares rose by 700% last year, valuing this business at nearly eight times more than Volkswagen, even though VW generates more than twice as much profit. NIO stock rose by 1,400% in 2020, valuing this loss-making business at about £65bn.I’m just not comfortable with these sky-high valuations and rocketing share prices. For me, the performance of these shares over the last year looks very much like a bubble.SMT share price: my decisionIf I’m right and there is a bubble, then history suggests it will pop at some point. If this happens, the value of Scottish Mortgage shares would also be likely to fall sharply. This is because the value of SMT shares is based on the value of the investments held by the trust.Don’t get me wrong — I think many of the businesses in which SMT is invested are great with strong futures. But everything has a price. For me, many of SMT’s holdings are just too expensive right now.I won’t be investing in Scottish Mortgage at the current share price. But I’ll continue to follow the trust’s progress with interest. Image source: Tesla Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Enter Your Email Addresslast_img read more

Read More →