"If an investor was nervous six months ago about buying the trust on a premium and elevated underlying portfolio valuations, then this undiscerning sell off and today’s 9 per cent discount signals a good time to look again.”
Jayna Rana, investment trust analyst at QuotedData,says investors need also to be mindful of the "concentration risk" associated with the trust – that is, it owns large stakes in all of its investee companies and has relatively few investments given its size.
California dreaming
The trust has focused a lot of its time and energy in recent years on creating the infrastructure to help it generate and evaluate future ideas, including Slater spending extended periods of time in California in recent years in order to develop ties with the technology community.
Slater has a strong personal relationship with Tesla chief executive, and that company is a top 10 shareholding in the trust. Tesla shares performed extremely well during the pandemic lockdowns, but have fallen by around 27 per cent over the past month, as investors worry about the potential impact on Tesla’s share price after Elon Musk’s attempted takeover of Twitter.
Musk has already sold billions of dollars worth of shares in the company in order to raise cash for the Twitter purchase, while he has also pledged billions of dollars of his shares as collateral for cash he is borrowing from banks to fund his Twitter purchase.
On the biotech side, one of the non-executive directors of the Scottish Mortgage investment trust is a professor of medicine at Oxford University.
Baillie Gifford managers have recently expressed frustration that the share price of Moderna, which is the trust’s largest investment, has retreated to the level, in price/earnings terms, it was at before it created one of the Covid-19 vaccines.
That vaccine used MRNA technology, which had, until that point, been unproven, but which could have a wide range of clinical applications.
Lovett-Turner says many of the companies held in the Scottish Mortgage trust are actually performing well as businesses, but this is not being well reflected in the share prices, due to wider market sentiment.
He welcomed Slater’s acknowledgement that it was a mistake to continue to invest in Chinese companies at a time when Chinese authorities were adopting a different approach to regulation.
david.thorpe@ft.com
