2023 has certainly provided a lift to the Tesla stock price, which is up 65% so far in January. As one of the top 10 holdings in the portfolio of Scottish Mortgage Investment Trust (LSE: SMT), that ought to be good news for Scottish Mortgage shares.
Could this be the start of a broader turnaround for the trust’s shares – and might now be a smart moment to buy them for my portfolio?
As an investment trust, Scottish Mortgage owns shares in dozens of different companies. That means that buying into it offers a way for me to increase the diversification of my portfolio.
At one point, Tesla was the biggest single holding within the Scottish Mortgage portfolio. Indeed, the position reached such a size, thanks to a soaring Tesla stock price, that Scottish Mortgage reduced its stake in the carmaker substantially.
Despite that, it remained the seventh-largest holding in the trust’s portfolio at the end of last month, accounting for 3.2% of it. So even a very strong Tesla performance will likely only have limited positive impact on the investment trust share price.
The bigger picture
Indeed, despite the boost provided by a soaring Tesla share price, Scottish Mortgage shares are within 5% of where they stood at the start of this month. Over the past year, they have lost 30% of their value.
With a portfolio that contains a lot of tech companies, Scottish Mortgage has seen its share price suffer as many tech shares have tumbled from their former heights. Despite its surge this month, for example, the Tesla share price is still 43% below where it stood a year ago.
What comes next?
The global economy remains in treacherous waters. But, as Tesla’s strong January performance suggests, some investors are becoming more optimistic about what lies ahead.
That could lead to a rally in some shares, perhaps boosting the worth of Scottish Mortgage’s portfolio. That may help lift the share price.
For now, though, I see Tesla as an individual share doing exceptionally well of late rather than necessarily a sign that the wider stock market is about to take off dramatically.
I do not think that matters much for the investment case of Scottish Mortgage shares, though.
As a long-term investor, I would not buy an investment trust on the basis of a short-term movement of just one share it owns. Rather, I would focus on the overall investment strategy of the fund managers — and valuation.
The Edinburgh-based trust has a long-term track record. While the recent performance of Scottish Mortgage shares has been poor, the approach of aiming to invest in compelling growth stories at an early stage continues to attract me.
The current share price offers me what I think is an attractive entry point. There is a risk that if tech shares stall or start falling again, there could be more price turbulence ahead. Despite that, if I had spare cash to invest, I would buy into Scottish Mortgage.
The post Will the soaring Tesla stock price kickstart Scottish Mortgage shares? appeared first on The Motley Fool UK.
Is Scottish Mortgage a top choice for growing wealth now?
Before deciding, we think this pick is another must-see.
Discover ‘One Top Growth Stock from The Motley Fool’ absolutely FREE.
Last year, this extraordinary company grew revenues by more than £217 million. And for 5 years, revenues have grown at a compounded rate of nearly 60%. That’s more-than double Google and Amazon! Earnings have exploded 3,000%.
And it’s happening in an unusual way most people never see.
As The Financial Times reports:
“On an average day, redacted readers buy roughly 43,500 items – from luxury dog beds to remote-controlled golf trolleys – after clicking on links in articles.”
When they do, this company collects some of the cash – adding up to humongous profits. Its global audience reaches some 506 million people – across 250 coveted online brands. While past performance doesn’t guarantee future results, we think the outlook could be spectacular.
So please, don’t leave without seeing, ‘One Top Growth Stock from The Motley Fool’.
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
This FTSE 100 stock has £1bn in Tesla and SpaceX. Is it a buy?
Scottish Mortgage Investment Trust: 3 stocks to help its rebound in 2023
Investors are selling Scottish Mortgage Investment Trust shares! What should I do?
Are Scottish Mortgage shares going to outperform in 2023?
Scottish Mortgage shares could be rewarding. How’s the risk?
C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. 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.