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The Scottish Mortgage Investment Trust (LSE: SMT) share price had a solid November. It rose 9.2% versus a 2.2% gain for the FTSE 100 index and 6.2% for the Nasdaq. The stock’s up 31% in one year.
What happened in November to drive this rise?
US election
At the beginning of the month, we had Donald Trump’s election win. This sent indexes higher in the US, where the majority of Scottish Mortgage’s growth holdings are listed.
Some analysts reckon this result will unleash “animal spirits” in markets, and we’re starting to see this. Both the S&P 500 and Nasdaq notched new records in November.
Large holdings like Amazon and Tesla did very well, rising 11.5% and 38.1% respectively. In turn, this boosted the trust‘s performance.
The long term
Next, we had Scottish Mortgage’s half-year results on 8 November.
At first glance, this wasn’t particularly exciting. Between March and September, net asset value per share (NAV) increased 1.9%, compared to a rise of 3.6% for the FTSE All-World Index (its benchmark).
In other words, it failed to outperform during the period. However, the trust’s managers ask shareholders to judge it over five years or more.
Across these long-term timeframes, things look a lot better.
| Period* | Scottish Mortgage NAV growth | Index growth |
|---|---|---|
| 5 Years | 88.9% | 66.9% |
| 10 Years | 347.8% | 211.3% |
Now, the fund still trades at a discount to NAV. In an attempt to narrow this, it repurchased £880m of its own shares during the period.
Progress has been made, as the discount now stands at 9.8% versus 16% the year before. The buybacks will continue, but there’s debate as to whether this is the right move.
After all, there’s a risk the discount widens, despite the repurchases. As a shareholder, I’d prefer Scottish Mortgage use cash to make further investments.
Trimming Nvidia
The big news during H1 was that the position in AI chipmaker Nvidia was reduced.
Manager Tom Slater wrote: “The primary challenge hindering large-scale AI adoption remains the high cost. Companies must find ways to offer competitively priced AI systems while managing the skyrocketing costs of training them. This raises concerns about the sustainability of current capital equipment spending, including Nvidia chips.”
Nvidia stock has been a massive winner since the trust first invested in 2016. I’m happy it locked in some gains, while still keeping it as a top five holding.
Northvolt and SpaceX
However, the private company side of the portfolio disappointed, declining by an average of 11.3% in the period. This hit the NAV by around 3%, which was a big driver of underperformance.
Northvolt, the Swedish EV battery maker, has collapsed. This setback is disappointing for Europe, as it’ll increase reliance on imported EV batteries, including from China.
Could more private holdings go under? It’s possible.
In better news, SpaceX’s value is rocketing and is now Scottish Mortgage’s third-largest position. It’s introduced a more affordable Starlink ground terminal, while its massive reusable Starship rocket is making incredible progress.
The age of AI
The trust’s portfolio is packed with AI innovators, and it says “understanding the implications” of this revolutionary technology will be its “task for the next decade“.
This task is important for most stock-pickers, I’d argue. Many industries could be disrupted.
Overall, I’m happy with the size of my position, but I think investors might want to consider Scottish Mortgage shares today.
