Scottish Mortgage (LSE: SMT) stock is now down over 30% since the beginning of 2022. As difficult as it has been to watch the value of my holding fall (and fall some more), there are several reasons why I’ve stayed invested.
Bullish on Scottish Mortgage stock
First, there’s the track record of managers Tom Slater and (very-soon-to-depart) James Anderson. In the last five years, the Scottish Mortgage share price has climbed just under 140%. That’s despite a global pandemic and, more recently, the awful conflict in Eastern Europe.
By comparison, the FTSE 100 is up a paltry 3% in value. Even with dividends added, the difference in returns is stark. Put simply, Slater and Anderson have proved themselves to be canny stock-pickers. A slump in the wider market doesn’t alter this fact.
The 0.34% management charge is also very reasonable, especially as the trust has an active share of 93%. The higher the latter, the more the fund deviates from its underlying benchmark. That’s exactly what I’m looking for if I’m paying someone to invest on my behalf in the hope of beating the market.
The early bird
One reason for the high active share is that Scottish Mortgage gets to invest in unlisted companies which could go on to become the mega-caps of tomorrow. Some will struggle, or fail, of course — that comes with the territory. But it only needs one or two to succeed to make a big difference.
Private or public, Scottish Mortgage has form when it comes to backing winners early. It first started buying Tesla in 2013. That bet worked out sensationally well, even if the shares remain volatile to this day.
Temporary pain
Perhaps most importantly, I’m struggling to see how any of the current headwinds impacting the Scottish Mortgage share price are anything but temporary.
Seen from the perspective of a patient Fool, short-term issues can actually be wonderful opportunities to load up. It’s a topsy-turvy way of thinking that many even experienced investors struggle with. And that’s why it works.
Not ‘if’ but ‘when’?
Taking the above into account, I reckon Scottish Mortgage stock will eventually recapture its form and eclipse previous highs. When? Ah, that’s an entirely different matter!
I don’t know when things will turn around. I don’t know when growth stocks will be back in fashion, when inflation will cool, or supply chains will normalise. On a more comforting note, neither does anyone else. But all the above will happen.
There’s still downside risk, of course. This is why it’s vital to never put all my eggs in one basket, even if that basket has performed seriously well over time. Some diversification is essential. SMT could have further to fall.
Solid buy-and-hold
I get it. Saying the Scottish Mortgage share price will soar sounds like hyperbole. It’s not helped by my inability to set a date for popping the Champagne cork.
But when market sentiment does change, I think it’s far better for me — someone investing for the next few decades — to be holding disruptive stocks with strong outlooks rather than low-quality companies having their time in the sun.
I hope to add to my holding while there’s still time.
