4 key themes affecting the Scottish Mortgage share price

Scottish Mortgage Investment Trust (LSE: SMT) buy the shares what it represents “The best growth company in the world“. Indeed, Scottish Mortgage’s share price growth has rewarded long-term shareholders with good returns.

Despite recent falls, the stock is up 421% over the past decade — more than double the benchmark’s 207% gain, FTSE All World Index.

Four themes categorize the majority of stocks owned by flagship Baillie Gifford FTSE 100 reliable. Let’s explore.

A digital world

One theme is digital transformation.

Semiconductor clothing ASML exemplifies the concentration of trust in this area. The Dutch company is the second largest position in Scottish Mortgage with 6.7% of the portfolio.

In addition, the Argentine e-commerce giant Free market is the eighth largest holding at 3.1%. MercadoLibre provides an online marketplace and financial services. It means Latin America Amazon.

After taking a big hit from Amazon’s stock drop in 2020, the trust’s track record is impressive. I believe fund managers can identify new opportunities in the ongoing digital revolution.

Decarbonization

Another theme is renewable energy.

Swedish lithium-ion battery maker Northvolt is the fifth largest with 3.6%. It’s a private company, so I can’t buy shares on the stock exchange, but Scottish Mortgage offers me indirect exposure.

Tesla no introduction needed. It holds the seventh largest at 3.2%. The company operates in a growing market with ongoing government incentives to increase the adoption of electric vehicles.

PwC believes that annual global decarbonisation rates must increase to achieve a net zero economy. The required rate of 15.2% is 11 times faster than the worldwide average of the last 20 years, which shows the significant growth potential of this sector, in my view.

Technology meets health

Scottish Mortgage is also focusing on the combination of technology and healthcare.

Modern is a household name because of the Covid-19 vaccine. This is the largest position of the trust at 10.6%. It is developing mRNA technology to target large public health challenges.

Perhaps a lesser known name is the DNA sequencing business Illumina. The California-based company is the third largest shareholder, with 4.1%.

There is no doubt that the pandemic has accelerated the development of technology in healthcare. Offering the potential to develop a vaccine for cancer, the flu, or HIV, I think the sky’s the limit for the demand for mRNA technology.

However, breakthroughs are difficult to predict with certainty. Scottish Mortgage is taking a big bet on Moderna shares – only time will tell how the strategy works.

And beyond…

The final theme includes the final frontier – space – among others.

Space Exploration Technologies is another private company owned by Scottish Mortgage. Elon Musk’s venture is the fourth largest position with 3.6%. From satellite launches to Starlink internet access services, SpaceX operates on the fringes of the cosmic economy.

Space offers enormous opportunity as well as uncertainty. There is a danger that investors can be too optimistic about technological progress.

However, it is reassuring that Morgan Stanley analysts share Scottish Mortgage’s outlook, predicting the global space economy could double to more than $1trn by 2040.

I hold Scottish Mortgage shares

Owning speculative growth stocks carries risks for stocks, of course. These stocks are very sensitive to market sentiment, and there are always concerns that fund managers could make bad choices.

However, I like the exposure Scottish Mortgage offers to an innovative global company. I am comfortable with my current stock holdings and I will be looking for a dip buying opportunity in 2023.