Should I buy Scottish Mortgage shares at £7?

The past year has not been good Mortgage Scotland (LSE: SMT). During that time, the investment trust’s shares have lost more than a quarter of their value. I can now add a few to my portfolio at around £7 each.

But should I?

A wider setback

As an investment trust, Scottish Mortgage’s share performance is linked to the underlying investment.

Key ownership such as Tesla, Modernaand ASML everything has collapsed over the past 12 months. This helps explain why trust stocks are cheaper today than they used to be.

The flipside is that if the stock recovers, it could help boost Scottish Mortgage’s share value. Tesla may be 24% below its value over the past year, but it’s already on track for 2023. The stock is up 87% so far this year.

With a diverse portfolio that includes dozens of names, Scottish Mortgage is sure to have some wins and losses over time. The heavy weight of technology has suffered as the value of technology has retreated. However, some tech names have made a huge comeback. If the trend continues, it could boost Scottish Mortgage’s share price in the near term. Then again, the opposite can happen.

Strategic approach

As a believer in long-term investment, though, the focus is more outward.

The Edinburgh-based investment trust has a history of over a century (indeed, it last cut its dividend in the 1930s!) How has it survived and continued to thrive to this day?

As the slogan “invest in the future” suggests, in part because the trust is already focused on what it will do — and trying to benefit financially.

As the trust stated in the interim results, “Financing the development of long-term growth companies is not what interests most investors“. In other words, investor enthusiasm has cooled for early-stage companies that siphon large amounts of capital.

That is still the approach that is adopted though. In the long run, I think it makes a lot of sense. By getting in early, the trust can hopefully benefit if some of the options turn out to be a very successful company. That has led to success in the past decade. Future success – or failure – will depend on what the fund manager buys and how they value it. Overpaying for growth stories is a risk.

On balance, however, I think the strategy may work well in the future. It takes patience – but as an investor, I have no problem.

Why did I buy it?

After a weak performance last year, Scottish Mortgage shares are just 4% above their 52-week high. They can move lower in the short term, but instead of trying to time the market I’m looking for what I think could be a big season.

On that basis, £7 a share looks like good value. If I had the money to invest today, I would buy it.