The Scottish Mortgage share price is down 43%, is it now too cheap to miss?

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Over recent months, many tech-focused stocks have been hit hard during market corrections. Rising interest rates and inflation are among some of the factors causing this dynamic. The Scottish Mortgage (LSE:SMT) share price has also plummeted, but is it now a bargain? Let’s take a closer look.

Price movements and a trading discount

It’s quite clear that this investment trust has been caught up in recent market sell-off. Over the past year, the shares are down 43% and they’ve fallen 31% in just the past three months. They currently trade at 715p.

Baillie Gifford, the asset manager running Scottish Mortgage, says it’s run with a five-year timeframe in mind. To that end, I’m not particularly stressed about recent share price action.

In fact, this could provide the perfect opportunity for me to scoop up some shares at a low price. By referring to the net asset value (NAV) — the value of Scottish Mortgage’s underlying holdings — I could be getting a bargain.

The NAV is currently 823p. Based on today’s share price, the stock is trading at a discount of just over 13%. This indicates that the market may have overdone the sell-off of these shares.

However, with a gloomy economic outlook, it’s possible that this downtrend may simply continue.

Geographical diversity and problems in China

On the other hand, there are many things that attract me to Scottish Mortgage. It would provide me with exposure to a number of companies, both listed and unlisted, like Tesla and SpaceX.

I could also gain geographical diversity, because it has holdings in businesses from the US to China.

In addition, the skill and confidence of the fund managers was shown when they made vaccine-manufacturer Moderna the largest holding towards the beginning of the pandemic.

All of these factors make buying the stock very appealing to me, combined with the fact that it holds some of the world’s biggest and best-known firms.

That said, an issue is that it has invested heavily in Chinese tech stocks Alibaba and Tencent in recent years. Continued pandemic lockdowns in China have had a disastrous impact on supply chains and production. The problems have been particularly acute in the tech city of Shenzhen, in the south of the country.

If China eventually eases these measures, which it should, I think Chinese element of Scottish Mortgage’s holdings may start to perform well again. There’s a risk, though, that these issues persist and potentially worsen.

Overall, buying Scottish Mortgage shares isn’t without its risks. Being very tech-focused, the share price could continue to slide due to the current economic climate. That said, it’s trading at a discount and, given the diversity it provides, I’ll be buying some shares with a view to holding them for the long term. I’ll just have to hope I’m buying the dip!   

The post The Scottish Mortgage share price is down 43%, is it now too cheap to miss? appeared first on The Motley Fool UK.

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More reading

  • Are Scottish Mortgage shares a bargain at £7?
  • Does the Scottish Mortgage (SMT) share price make it a no-brainer buy now?
  • The Scottish Mortgage share price is down 45%. Here’s why I’d buy and hold!
  • Here’s why Scottish Mortgage shares fell 8% yesterday
  • Here’s why I’m finally buying Scottish Mortgage Trust shares!

Andrew Woods 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.