A lot of FTSE 100 constituents look cheap as chips right now. But one in particular stands out to me — Scottish Mortgage Investment Trust (LSE: SMT).
I feel like it’s a bit overlooked. It’s been around a very long time but after a surging price during the pandemic period from 2020, it has fallen out of the spotlight. Today, investors can snag a share of the Baillie Gifford fund for just £8.12. That’s some way off its all-time high of £15.29, which it hit in November 2021.
But I think Scottish Mortgage could be about to make a comeback. I reckon investors should consider buying some shares today at its slashed price.
Gaining momentum
While its shares still look like a steal to me, they’re not as cheap as they were a year ago. During that time, they’ve climbed 28.1%. The stock has been gaining momentum. There are a few reasons for that.
Firstly, markets are beginning to prepare for interest rate cuts. Inflation has been steadily falling over the past 12 months. While we’ve experienced a few blips recently, I’d still expect to see the base rate come down at some point this year.
On top of that, some of the trust’s largest holdings have performed extremely well over the last year. With that in mind, its share price has been given a boost.
Cheap as chips
But even so, I think the trust still looks like one of the best bargains out there today. After all, it’s trading at a 9.1% discount to its net asset value. That means I can buy high-quality names such as Moderna, Amazon,and Spotify, just a few of the 99 companies the trust holds, all for cheaper than their market rate.
Of course, over a quarter of the holdings in its portfolio are private companies. Valuations for these businesses are often difficult to pinpoint. Should they go public, their valuations could get marked down.
Exciting times ahead
But on the flip side, there’s also the potential that they rise. And with Scottish Mortgage’s successful stock-picking track record, I have faith in management’s investment decisions.
For example, it purchased shares in Tesla back in 2013, which has proved to be an incredibly fruitful investment. Scottish Mortgage first invested in Nvidia back in June 2016. Since then, the stock has risen a whopping 6,497.4%.
The trust has a heavy focus on artificial intelligence (AI) and that excites me. The AI industry is currently worth around $200bn but that’s expected to rise to over $1.8trn by 2030. That’s a massive market I believe Scottish Mortgage can tap into.
Suits me to a tee
This sort of investment strategy can be very risky though. Investing in growth stocks doesn’t always pay off and I’m expecting bouts of volatility when investing in this one.
But as someone with a multi-decade investment horizon and high tolerance to risk, the trust’s strategy suits me very well.
If I had investable cash today, I’d be rushing to snap up some Scottish Mortgage shares.
