If I’d invested £5,000 in Scottish Mortgage shares 10 years ago, here’s how much I’d have now!

Warren Buffett, perhaps the most successful investor of all time, once said: “If you are not willing to own a stock for 10 years, don’t even think about owning a stock for 10 minutes.“. That invests in Scottish Mortgage Investment Trust (LSE:SMT) stocks of the past ten years have certainly benefited from this approach.

Ignoring fees and dividends, an investment of £5,000 in 2013 would now be worth £22,350. In the same period, the FTSE 100 has increased by ‘only’ 23%.

However, when looking at the more recent time frame, the stock has underperformed. For example, in the last two years, the share price has fallen by 45%.

However, this has nothing to do with the trust’s manager, Baillie Gifford. Writing in 2022, he said: “We believe that the long horizon that we approach investment is the source of a lot of uniqueness and our edge.“

What did they do?

Scottish Mortgage is a fund that aims to invest in “the world’s most extraordinary growth company“.

In terms of risk, the manager himself rated it six out of seven. This relatively high risk assessment reflects the innovative products and services provided by the company in its portfolio. It also takes into account the fact that not all listed on the stock exchange are recognized. This means it can be difficult for funds to dispose of some holdings.

Despite its emphasis on technology companies, the fund also has significant exposure to the consumer goods and healthcare sectors. At the end of last year, the top 10 investments accounted for 43.7% of all assets held.

holding	business	% share price change (last 12 months)	% of total fund assets
Modern	Vaccine	+1.9	10.6
ASML	Semiconductors	+0.9	6.7
Illumina	Biotechnology	-40.5	4.1
Space Exploration Technology	Space exploration (Elon Musk)	Unquoted	3.6
Northvolt	Lithium-ion battery	Unquoted	3.6
Meituan	Chinese shopping platform	-20.6	3.5
Tesla	Electric vehicles	-44.2	3.2
Free market	Online market in Latin America	+4.0	3.1
dry	Luxury goods	-15.9	2.8
Tencent	Technology and entertainment	-15.4	2.5

Growth, growth and more growth

The fund is strongly focused on growth. If I’m hoping for a steady stream of passive income, I’ll have to look elsewhere.

However, it pays small dividends. It is claimed that every year – except for 1933 when the Depression was at its peak – it has maintained or increased its dividend.

Although the fund pays an annual management fee (currently 0.32%), the current dividend rate (yielding 0.5%) is more than enough to cover the cost of owning the stock.

Should I buy it?

With positions in 101 companies, I like the fact that it is possible to achieve a degree of portfolio diversification with the ownership of just one stock.

I was also impressed with the quality of the company. There seems to be a good mix of household names and market disruptors.

Now also seems to be a good time to buy.

Every trading day, the director releases an estimate of the net asset value (NAV) of each fund share. This is currently about 10% higher than the share price, which means the stock is undervalued. Although valuing shareholdings in unlisted companies can be subjective, most of the fund’s investments are easily valued by reference to stock prices.

For all these reasons, the next time I have some spare cash, I will consider buying some Scottish Mortgage Investment Trust shares, with a view to holding for at least 10 years.