Scottish Mortgage shares keep crashing. Is this a once-in-a-decade opportunity to buy them?

After years of taking the lights off, the view gets darker and darker Mortgage Scotland (LSE: SMT) shares. They lost about half their value in 2022, and also failed to take advantage of the recent recovery.

They have fallen another 13.9% over the past six months, while the global benchmark index has risen 2.5%.

Measured over a year, investors in Scottish Mortgage Investment Trust experienced a loss of 32.6%, against a 7.3% decline in the benchmark.

Until last year’s problem, it was the most popular investment trust in the UK, and the sales data of the fund platform shows that investors cannot resist the falling knife.

Recovery has yet to come

I like to buy stocks after the price collapses, so I understand why investors take risks. This could be a once-in-a-decade buying opportunity, but only if Scottish Mortgage gets its mojo back at some point.

I wrote warmly about Scottish Mortgage for years, but it started to cool when I began to suspect the tech boom has become overblown. I’m surprised to see such a risky bet as an electric car manufacturer Tesla still number one holding trust, in almost 10% of its portfolio.

Given Tesla’s volatility and what I think is an absurd overvaluation, it seems like it’s asking for trouble. Holdings in Chinese technology giants Ali Baba and Tencent further cranked up the risk/reward ratio.

I was doubly alert when the man who built the fund’s barnstorming reputation, co-manager James Anderson, retired in April 2022. He quit just in time.

Tom Slater’s current mission is to identify companies and entrepreneurs who are building the future of our economy and are already set “change the world”the company said. “Academic research has shown that very few companies generate large profits. So, finding those few companies is what drives us.

Investors should be patient here

Talk of fighting, but it’s better when the economy improves and money is readily available, none of that is the case now. As central bankers tighten pressure, start-ups struggle to raise finance.

Another concern is that managers investing in visionary companies run the risk of getting caught up in all the futuristic hype. I think that has happened to Scottish Mortgage. But Slater appears to have learned some hard lessons. And the types of companies that are targeted will do better when recession scares and the economy picks up. Investors who get in early can reap the rewards.

Many investors will continue to wait for the ‘pivot’ of the US Federal Reserve, when it starts cutting interest rates instead of raising them. Startup and growth stocks will certainly do better as the rate cycle turns, but I worry that anyone expecting the tech boom to pick up where it left off will be disappointed.

I remember after the dotcom crash in 2000. The market didn’t stop for more than two years. The tech resurgence took almost a decade. I will only buy a Scottish Mortgage with the same timeframe.

Slater himself admits that change doesn’t happen overnight. Nor will Scottish Mortgage Recovery. It may take a decade for this opportunity to play out.