Scottish Mortgage Investment Trust PLC

Scottish Mortgage Investment Trust PLC (LON: SMT) is an FTSE 100 listed investment trust that aims to maximize total return from a portfolio of long-term investments.

Investment Rationale – Watch at GBX 969.00

• Weak Financial Update: In the half-yearly report (for the six months to 30 September 2021) released on 8 November 2021, there was a significant decline in gain on investments, net return before finance costs and taxation, and net return on ordinary activities against H1 FY21.
• Subdued Macroeconomic Conditions: The dented risk appetite of investors amid record inflation rate in the UK, Ukraine war crisis, expectations for further interest rates hikes, and uncertain demand outlook.
• Underperformance Against Index: SMT’s stock price has fallen over 22% in the past year, reflecting a significant underperformance against the FTSE 100 index.
• Unfavourable Technical Indicators: From the technical standpoint, the MACD line has given a bearish crossover against the signal line, while it is hovering below the centreline.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Conclusion

Based on the weak financial results, macroeconomic uncertainties, negative equity returns, and bearish technical indicators, we have given a “WATCH” recommendation on Scottish Mortgage Investment Trust PLC at the closing market price of GBX 969.00 (as of 21 February 2022).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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