Scottish Mortgage shares had an awful 2022. Time to buy?

2022 was a disappointing year in many ways. It should not have rewarded the shareholders Scottish Mortgage Investment Trust (LSE: SMT). The Scottish Mortgage share price history graph in Euros shows all quotes over the past 12 years.

Does that mean now might be the right time to move stocks?

Why is 2022 so bad?

Before considering what’s next for Scottish Mortgage shares, you need to understand why they’ve done so well this year.

As an investment trust, the company invests in various companies. So if I buy Scottish Mortgage shares, I’ll be getting a whole range of different businesses. This can be good if the company is good. But it could also mean that the stock is falling if the underlying investment is not doing well.

That’s actually what happened last year. Companies such as Tesla, Amazon and Meituan has seen its share price fall in 2022. Scottish Mortgage shares have fallen.

Scottish Mortgage has been affected in two main ways. Heavy exposure to technology means that even when a company like Tesla collapses, it also suffers. But exposure to Chinese companies like Meituan has also hurt.

Some Chinese companies have seen their prices slide this year. Scottish Mortgage has now reduced exposure to some of the long-term Chinese Holdings such as Ali Baba and Tencent.

Until 2023

So what’s next? Although many tech stock prices have fallen sharply, they may continue to fall. Take Amazon as an example. The stock price fell in 2022. But it trades at a price-to-earnings ratio of more than 70. That hardly seems cheap.

Meanwhile, Chinese growth stocks have been an important part of the trust’s strategy for years. Reducing exposure to China could help Scottish Mortgage’s performance. But it can also hurt. After all, from a long-term perspective, China remains one of the great global growth stories.

Scottish Mortgage installed new management this year. This may mean a change in investment strategy, for better or worse. It has a good track record of identifying promising growth stories at an early stage. One benefit of investing in dozens of businesses is that you can make few big mistakes, as long as only a few choices are made strongly.

But it remains to be seen whether they will benefit next year from the exceptional performance by some of the companies they have invested in.

I want to buy shares

So recovery may not happen in 2023. Indeed, Scottish Mortgage shares may continue to lose value.

However, if I had the money to invest today, I would buy stocks for my portfolio. I think a confident approach to finding value in early-stage growth stories can help propel the stock in the coming years.

I am a long-term investor. On that basis, I see the share price crash in 2022 as a buying opportunity for my portfolio.