The Scottish Mortgage Investment Trust PLC (LON: SMT) share price has risen 12.24% in the past month as investor sentiment towards the company shifted from bearish to bullish. However, the company’s shares are still trading at a discount to its net asset value (NAV).
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SMT shares have taken a beating and are trading over 50% down from their pandemic highs after investor sentiment towards the high-growth companies held by the fund turned sour. The decline in the share price was also driven by the significant declines witnessed in its holdings.
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YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY
Still, for a company to trade at a discount to its net asset value (NAV), it means that the shares of the companies it holds are worth much more than the fund’s shares allowing investors to buy the fund’s (SMT’s) shares at a discount.
The slump in the SMT share price can be directly linked to the high interest rate environment that kicked off in March 2022 as the Federal Reserve and other leading central banks started hiking interest rates. Many of the high-growth companies held by SMT rely on lending from banks.
Therefore, as banks tightened their lending requirements and the interest rates on loans surged higher, it became difficult for many companies to access cheap capital to invest in their operations and continue growing, which triggered a decline.
Luckily for SMT, the fund does not invest in startups but targets companies with a proven business model and robust sales in their respective geographies and industries. These companies are more resilient than startups, many of which have struggled to stay afloat during the challenging market environment.
The question on most investors' minds is, are SMT shares a buy? The short answer is yes. The company’s shares are trading at a discount, making them attractive. However, this is not investment advice since everyone’s circumstances and objectives differ.
*This is not investment advice.
Scottish Mortgage (SMT) share price.
The Scottish Mortgage (SMT) share price has risen 12.24% in the past month as investor sentiment has improved.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.