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  • FIRST POST
    • Alz1986
    • By Alz1986 7th Jun 19, 5:10 PM
    • 86Posts
    • 20Thanks
    Alz1986
    Scottish Mortgage Trust - Bright Future?
    • #1
    • 7th Jun 19, 5:10 PM
    Scottish Mortgage Trust - Bright Future? 7th Jun 19 at 5:10 PM
    Wanted to get some of your thoughts on SMT, which is approaching 1 year I've been invested into. This is a large holding for me, and becoming concerned at its under performance having entered at its peak (bad luck), to my credit I stomached seeing it drop to £4.20 from £5.68, today it finished at £5.10p. I would have thought it touched back close to its peak at least once in the past year, but it hasn't.

    I understand its a popular investment, but is it overhyped? They get alot of positive coverage, and I've noticed articles on the Trust never highlight its peak against its current valuation. They are likely now to have a large negative NAV (running last 52 weeks) for a while.

    James Anderson talks alot about his good relationship with businesses, I'm getting concerned he may also have a good relationship with the journalists/organisations publishing the articles.

    Even when indexes were hitting all time highs in April, SMT was only managing £5.35.

    I like James Anderson, hevseems more trust worthy than Neil Woodford who looks more like a betting shop manager than a respected fund manager.

    SMT Since hitting its high's of £5.68p per share in late August, and the subsequent global sell off, has never actually recovered. Other funds whether large cap or small, index trackers have recovered and hit new high's.

    Their holding in Tesla is an obvious drag along with U.S' ongoing economic war/attacks on China affecting Tencent and Alibaba. Though I like Tesla and believe the future will be more Electric based, I suspected the holding was less about Tesla itself and more about winning a stake in Elon Musks Space X, unfortunately my theory turned out to be right as James Anderson confirms in this recent article

    https://citywire.co.uk/investment-trust-insider/news/scottish-mortgage-we-re-great-venture-capitalists-now/a1232883

    As for SpaceX Musk isnt planning to go public until they've sent a rocket to Mars, and they'll be doing this in 2024! And thats a big ambition to have, even if succesfull, why would it be worth anything more than Tesla's plunging valuation? In short, no returns will be made from such a relationship for some years atleast, while Tesla's drags the Trust. Couldnt they find somewhere else to invest their clients cash?

    Just looking for thoghts on why you all hold onto it, or rate it highly...? As I'm considering selling off and moving money elsewhere due to its 1 year negative NAV.
Page 3
    • bowlhead99
    • By bowlhead99 11th Jul 19, 4:09 PM
    • 9,402 Posts
    • 17,103 Thanks
    bowlhead99
    I finally sold my Fidelity China as I was bored with staring at a loss and the money has now gone into LTG & FS, who should give me some steady returns.
    Originally posted by iglad
    Seems quite a radical solution to move money out of a dedicated China fund into two global funds which each allocate 0% to shares in Chinese companies.

    Although you are right the returns will probably be steadier.

    One solution to being bored of staring at a loss is simply to imagine you had bought at today's price, or some other lower price, so that as of today, it isn't a loss. The fund itself doesn't really know or care what price you bought it at.
    • SeniorSam
    • By SeniorSam 11th Jul 19, 4:35 PM
    • 1,342 Posts
    • 692 Thanks
    SeniorSam
    Iglad ....... Smart move into LTG , I have been in there since April and have growth of 25.32% and with FS since June with growth of 17.61, so well pleased
    Last edited by SeniorSam; 11-07-2019 at 4:36 PM. Reason: missed name
    I'm a retired IFA who specialised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, so my comments are just meant to be helpful.
    • badger09
    • By badger09 11th Jul 19, 4:37 PM
    • 7,426 Posts
    • 6,955 Thanks
    badger09
    Seems quite a radical solution to move money out of a dedicated China fund into two global funds which each allocate 0% to shares in Chinese companies.

    Although you are right the returns will probably be steadier.

    One solution to being bored of staring at a loss is simply to imagine you had bought at today's price, or some other lower price, so that as of today, it isn't a loss. The fund itself doesn't really know or care what price you bought it at.
    Originally posted by bowlhead99
    Another is to stop staring at it
    • SeniorSam
    • By SeniorSam 11th Jul 19, 4:47 PM
    • 1,342 Posts
    • 692 Thanks
    SeniorSam
    I very nearly invested in SMT, but after reading a lot more about Musk, decided that his attitude to business was not for me. I am surprised that he has had so much backing but SM cannot back out now and must continue to support it, as they do in all their video's. I don't feel that they will prove as good as expected and would not go near them myself.
    I'm a retired IFA who specialised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, so my comments are just meant to be helpful.
    • MPN
    • By MPN 11th Jul 19, 5:18 PM
    • 305 Posts
    • 121 Thanks
    MPN
    I very nearly invested in SMT, but after reading a lot more about Musk, decided that his attitude to business was not for me. I am surprised that he has had so much backing but SM cannot back out now and must continue to support it, as they do in all their video's. I don't feel that they will prove as good as expected and would not go near them myself.
    Originally posted by SeniorSam
    Tesla is only one holding in SMT (I think it’s about 6%) so I personally wouldn’t choose my investment strategy because of one poor choice of a holding. SMT also invest in many very good companies and always seem to eventually rebound after some big falls in the share price.
    • Thrugelmir
    • By Thrugelmir 11th Jul 19, 11:39 PM
    • 65,007 Posts
    • 57,312 Thanks
    Thrugelmir
    Tesla is only one holding in SMT (I think it’s about 6%) so I personally wouldn’t choose my investment strategy because of one poor choice of a holding. SMT also invest in many very good companies and always seem to eventually rebound after some big falls in the share price.
    Originally posted by MPN
    Around 10% in Amazon. A company I've never been keen on from a personal perspective. Lack of ethics.
    “If the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.”
    ― Niall Ferguson
    • ArchBair
    • By ArchBair 15th Jul 19, 9:59 AM
    • 139 Posts
    • 66 Thanks
    ArchBair
    Around 10% in Amazon. A company I've never been keen on from a personal perspective. Lack of ethics.
    Originally posted by Thrugelmir
    Agree about the ethics point of companies like Amazon but as MPN said, SMT do continue to rebound from a low share price to a high one so its not a bad IT to invest in but certainly not for the faint hearted!
    • Linton
    • By Linton 15th Jul 19, 12:52 PM
    • 11,295 Posts
    • 11,703 Thanks
    Linton
    SMT is very high risk - between June 2008 amd November 2008 it dropped by more than 60%. So it would be sensible to think carefully about your % holdings.
    • bowlhead99
    • By bowlhead99 15th Jul 19, 1:37 PM
    • 9,402 Posts
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    bowlhead99
    SMT is very high risk - between June 2008 amd November 2008 it dropped by more than 60%. So it would be sensible to think carefully about your % holdings.
    Originally posted by Linton
    On the Amazon point, they have been buyers of Amazon since $40 or so. If they sell it for $1000 a share it was a good investment, though in reality SMT's portfolio turnover is pretty low and they generally don't sell stuff that they like, even if it drops double digit percentages.

    However, if you buy their trust today when their Amazon holding is worth over $2000 a share and they later give up and sell it at $1000 a share you might think it a bad investment. Especially if you pay a premium to fair value to buy SMT today and then later sell some of your holdings at a discount to fair value, and the fair value losses made in the meantime were geared up with borrowing.
    Last edited by bowlhead99; 15-07-2019 at 1:39 PM.
    • stphnstevey
    • By stphnstevey 15th Jul 19, 9:48 PM
    • 3,116 Posts
    • 503 Thanks
    stphnstevey
    In terms of FAANGs, they seem to lack Apple, but have holdings to varying degrees in Facebook, Amazon, Netflix and Google

    They also hold the major China Tech Tencent, Alibaba and Baidu

    They hold some semiconductor Nvidia (although share price appears to be suffering from the downturn in Bitcoin mining)

    It appears to have around 80 holdings, but only 39 listed, the remaining are they private equity?


    Polar Capital Trust (similar Tech Trust) holds the FAANGs, this time including Apple

    They also hold the major China Tech Tencent and Alibaba, but no Baidu

    They hold some semiconductor Nvidia and also AMD
    • MarkCarnage
    • By MarkCarnage 16th Jul 19, 2:41 PM
    • 109 Posts
    • 82 Thanks
    MarkCarnage
    Reading this thread again last night, there appear to be quite a few misapprehensions....
    The preoccupation with Tesla seems to continue. It is 3.7% of net assets of this Trust. Not a game changer. If you want to debate Tesla, a separate thread might be better. Yes, Baillie Gifford might be wrong about Tesla, so might the many other posters.

    Secondly, the fund manager doesn't care about index performance, or day to day movements in stock prices. You might, and if it bothers you a lot that SMT performance might and will vary a lot from the overall market, don't invest.

    Thirdly, it's about 20% invested in unlisted holdings, and yes the proportion has increased quite a bit in the last two years, but it's been well flagged. Rationale is to invest in certain areas before the stocks go public and when equity capital raising may be done on more favourable terms to investors.

    No, it's not low risk. Is it very high risk? Depends how you define it. I don't happen to believe that shortish term price volatility is that good a means of measuring risk for long term investors. Permanent partial or total loss of capital is high risk in my book. Yes, there is a risk of partial loss of capital in SMT. Indeed, the managers will freely admit that a not insignificant proportion of their holdings may end up with little or no value. However, a number are likely to, and have, increased factorially in value. Let's assume the fund had 20 holdings, conceptually, the manager might realistically expect one of these to be the next Google or Amazon, two or three to do pretty well, another couple to perform in line with the market, five to underperform, and ten to go bust or close to that for an equity investor. I simplify, but that's not a million miles away from what has happened.

    Disclosure - I have held SMT for well over 10 years, it has seriously impacted my wealth, in the right way! I'm now at the stage where I may think about pruning it back a bit, not because I'm suddenly worried about, more because it is now a very significant part of my portfolio, and some rebalancing may be in order. Yes it fell nearly 60% in 2008-9, but the S&P500 Index fell 45% too in $ terms, so if you can't stomach SMT in that scenario, it sounds like equities in general might be a bit rich.

    Sounds like there are some people on here who neither understand how the fund is managed, nor should invest in it because of that, as they will end up selling. No, I don't work for Baillie Gifford and never have, but I do know the house quite well.
    • iglad
    • By iglad 16th Jul 19, 9:53 PM
    • 174 Posts
    • 50 Thanks
    iglad
    I've been with SMT since April and I'm more than happy with the performance which has really picked up over the last month or so. I'm not sure if it's the Woodford effect but as long as that share price keeps rising I'm happy. The unlisted companies does not bother me in the slightest as it's only about 20% but I think they have raised the limit to 25%.

    Some of the reactions on here towards investing makes me wonder if they should have their money in the building society instead.
    • iglad
    • By iglad 16th Jul 19, 9:57 PM
    • 174 Posts
    • 50 Thanks
    iglad
    The gains I've had with LTG & FS since selling my Fidelity China (invested in LTG & FS) have just helped to cancel out my losses with that fund. So yes It was a smart move but I can't take all the credit as it was poster in another forum who said "you could be staring at those losses for quite some time, so sell and invest elsewhere within your portfolio".

    That "hold until it picks up" is what got a lot of Woodford investors stuck in fund they can't get out of.
    Last edited by iglad; 16-07-2019 at 10:06 PM.
    • Alz1986
    • By Alz1986 2nd Aug 19, 12:00 AM
    • 86 Posts
    • 20 Thanks
    Alz1986
    Since I opened up this thread nearly 2 months ago, the share price has surged to reach its all time high. I'm glad I held on.

    Having scrutinised it some more - the upside potential of holdings like Amazon, Alibaba and Tencent (20% combined) is far greater than the downside risk posed by Tesla at 3.7%

    Also, making comparisons to Woodford is a bit far fetched, who ran a fund with large unlisted holdings (SMT is a Trust). He also looks more like a betting shop manager than a respectable fund manager.

    Since I posted this thread, I have been predicting a surge in the value but surprised it arrived faster than anticipated. Im projecting the value to keep on increasing after having a tough year.

    I still believe the managers at SMT and Baillie Gifford are far more effective and competant than many out there.
    • bowlhead99
    • By bowlhead99 2nd Aug 19, 6:59 AM
    • 9,402 Posts
    • 17,103 Thanks
    bowlhead99
    Since I opened up this thread nearly 2 months ago, the share price has surged to reach its all time high. I'm glad I held on.
    Originally posted by Alz1986
    Since I posted this thread, I have been predicting a surge in the value but surprised it arrived faster than anticipated. Im projecting the value to keep on increasing after having a tough year.

    I still believe the managers at SMT and Baillie Gifford are far more effective and competant than many out there.
    Within the portfolio Amazon has a lower share price now than a couple of days after your post; fortunately other stuff has gone up instead. But really about half the 'surge' has equally been available from pretty much any other fund with high overseas exposure.

    US$100 was worth £78.50 when you posted, but now it's worth £82.50, which means that every dollar of portfolio value has gone up 5% when valued in sterling. For HKD invested in Tencent, HKD100 was £10.01 but is £10.56 today, giving you another 5.5% for free. So really although the portfolio is back at its all time high of around 568p where it was last September, the portfolio is worth fewer dollars than it was then; it's just that at this moment in time, dollars buy a lot of pounds.

    You are right that BG are a decent funds group and their approach can generally do very well in rising markets. But concentrated portfolios can be painful when markets (including exchange rates) reverse.
    • iglad
    • By iglad 2nd Aug 19, 1:01 PM
    • 174 Posts
    • 50 Thanks
    iglad
    Another is to stop staring at it
    Originally posted by badger09
    lol I wish but as my platform shows my losses and my gains, anyway looking at it wishing it will go up didn't work my Fidelity China fund selling and investing it into better performing funds (LTG & FS) did.
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