Just how much lower can Scottish Mortgage shares fall?

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Scottish Mortgage Investment Trust (LSE: SMT) shares might have started to pick up a bit. The price is only back where it was about a month ago though. So I just can’t tell if this might be the start of a bull run. Or if it’s just noise.

The only way to find out is to wait and see, but might we be too late by then?

More falls

The shares could dip further before they get back to long-term growth. So how much lower might that be?

My answer is… I don’t care. That’s because I think trying to pick the bottom is a mug’s game.

Warren Buffett, the Berkshire Hathaway guru, thinks so too. And he’s one of the most successful investors who’s ever lived.

No time for timing

He goes on about how time in the market, not timing the market, is what counts. We shouldn’t buy a share if we don’t want to hold it for at least 10 years… there’s no end to good Buffett quotes.

But there’s one I think is most apt here. And I make no apology for using it again:

Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.

Warren Buffett letter to shareholders, 2016

So what’s this once-in-a-decade-or-so thing now?

I could point to high inflation or high interest rates, both of which have helped send a lot of share prices down low.

Tech crash

But I’m thinking of the Nasdaq slump. The US high-tech growth stock index was above 16,000 points in late 2021. It then went on to lose more than a third of its value in the next year.

The index gained a bit in 2023, but is still down more than 20%. And, so far, Scottish Mortgage shares haven’t caught up.

The discount remains stuck at 20%. That means, in effect, that we can buy a pound’s worth of its assets for 80p. I’d say that’s down to two main things.

Unlisted assets

One is that Scottish Mortgage has some of its cash in unlisted assets, like SpaceX. That adds risk, as they can be hard to sell.

Still, investment trusts are closed, so no money actually goes in or out. We just buy and sell the shares instead. So they can’t really be hit by the kind of run on funds that open-ended funds can face if folk want their cash out.

But I also think there’s still a lot of fear going round. Is the Nasdaq’s uptick just a bounce before it heads south again?

UK investors

Scottish Mortgage is a good way for UK investors to get a stake in assets like ASML, Moderna, Tesla… but we can often be more averse to risk over here, don’t you think?

Anyway, back to my headline question. I just don’t think it really has much meaning. The one that really matters, I think, is… are Scottish Mortgage shares good value now?

Even with the tech stock risk, I think they are.

The post Just how much lower can Scottish Mortgage shares fall? appeared first on The Motley Fool UK.

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Alan Oscroft has positions in Scottish Mortgage Investment Trust Plc. The Motley Fool UK has recommended ASML and 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.

Motley Fool UK 2023