The Scottish Mortgage (LSE: SMT) share price has taken a beating over the past year, down 33%. With inflationary pressures causing a weak economic outlook, investor confidence in stocks such as Scottish Mortgage has waned in 2022.
The investment trust has been a top performer over the past decade. And despite a 52-week low of 670p, the Scottish Mortgage share price is currently sitting at around 900p. Here’s why I think the stock could be a great long-term addition to my portfolio today.
Scottish Mortgage decline
As mentioned, this year has been nothing to write home about for Scottish Mortgage. With inflation spiking globally, including 10.1% and 8.5% for the UK and the US respectively, the trust has been in the firing line of this.
With a focus on growth stocks, some of its top holdings have seen large losses as investors have shied away from such businesses.
Its tech-heavy focus has also fuelled this downfall as the sector has seen a market correction this year. Combined, this has driven down the stock’s price.
Not all bad news
Despite this, it’s not all bad news for Scottish Mortgage.
For a start, the last month has seen the stock rise 13%, clawing back some of its recent losses. This could be a sign that investors are beginning to gain confidence in the trust once again.
Yet more importantly, what’s crucial for me is Scottish Mortgage’s long-term outlook. Sure, it’s had a tough year. However, management highlights that performance is judged over a five-year stretch. And therefore, short-term volatility is less of an issue to me. While past performance is no indication of future returns, the last five years have seen Scottish Mortgage shares rising 114%. Pretty impressive.
As a retail investor, I also deem the range it offers my portfolio to be vital. With one investment, I get a slice of stocks from a variety of sectors and countries.
What this essentially does is help offset risk. By owning a slither of each stock through the trust I’m avoiding the riskier play of buying its holdings, such as ASML, directly.
One issue I do have is its relatively large weighting in China. The nation recently reduced its medium-term lending rate by 10 basis points as data revealed a slowdown in consumer demand. With cracks starting to appear in its economy, this could spell bad news for Scottish Mortgage.
However, I still have faith in the Chinese economy’s potential to produce the ‘next big thing’. Scottish Mortgage has an eagle eye when it comes to finding high-growth companies that produce juicy returns.
I’m still buying
So, despite the near-term issues it may face, I’d still buy the shares today. I think from a long-term perspective its weighting in China has the ability to bear fruit. Add this to the diversity it offers my portfolio, and I’d happily open a position in the stock.
Trading at around the 900p mark, I’d buy Scottish Mortgage shares today and hold for the long run.
The post The Scottish Mortgage share price has suffered. Here’s why I’d still buy! appeared first on The Motley Fool UK.
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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML Holding. 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.