After hitting 52-week lows, is now the time to buy Scottish Mortgage shares?

Earlier this week, the stock price for Scottish Mortgage Investment Trust (LSE:SMT) hit a 52-week low of 658p. Despite a slight pullback, they are still trading comfortably below 700p. That confidence has dropped 30% over the past year. Although there are good reasons to fall, I am considering picking up some Scottish Mortgage shares. This is why.

The reason for the fall

In the short term, one driver for the move lower is the instability caused by the failure of Silicon Valley Bank (SVB) in the US. Along with several other smaller banks, SVB sent US stocks lower. As of last report, Scottish Mortgage held 32% of its exposure to US companies. So I can see why investors have sold the trust.

Over the past year, it has also been hurt by exposure to technology names such as Tencent and EV-maker Tesla. Despite a partial rally again in the stock to start 2023, last year’s performance acted as a drag on the fund as a whole. Tencent and Tesla are still in the top 10 holdings for the trust.

Concern is still ahead

I don’t think we’re out of the woods yet about the new volatility in the stock market. So, I see a risk ahead in the next month or so for Scottish Mortgage shares.

Of course, most of this will focus on banks and the stability of financial institutions. But for the stock market, uncertainty will surely keep the market closing higher. Since the trust only focuses on equity investments, there isn’t much to hedge against.

Potentially optimistic

Despite the doom and gloom, I see many reasons to consider buying the stock. During times of fear, investors may sell stocks beyond their fair value. This is difficult to measure, but is easier to do with a trust like Scottish Mortgage.

The trust publishes a net asset value (NAV), which indicates the current value of the shares. Logically, this value should correspond to the stock price and market cap. But currently, the share price is trading at a 16% discount to the last available NAV figure.

In theory, if the current true NAV is the same as the last reported figure, the share price would have to rise 16% over the long term to return to fair value.

Another point to note is that the benefit of buying a trust is against me trying to pick stocks myself. Don’t get me wrong, I am an active investor. But if I can add to the portfolio one stock that one invested in 50-100 shares, it makes sense. The fund manager effectively manages my money for me.

On this basis, I am seriously considering picking up some Scottish Mortgage shares in the coming weeks.