Scottish Mortgage Trust (LON: SMT) share price has underperformed the broader market amid woes in some of its key portfolio companies. The stock dropped to 780p on Thursday from the year-to-date high of 811p. It has underperformed other tech-focused funds like Cathie Wood’s ARKK and Invesco QQQ.
Tesla, Bytedance, PDD, and Kering woesSeveral companies in the Scottish Mortage portfolio are not doing well. Tesla, the biggest EV company in the world, has crashed by over 30% in 2024, making it the worst-performing stock in the Nasdaq 100.
Tesla is struggling as concerns about the EV industry remains. It has received several downgrades from Wall Street analysts, who believe that the company lacks a clear catalyst. In my last article on Tesla, I warned that it had formed a death cross on the daily chart, a common red flag.
Tesla is not the only EV company that is struggling. Most of EV stocks have tumbled while Fisker is said to be about to go bankrupt. Tesla accounts for 3.5% of Scottish Mortgage holdings.
Scottish Mortgage also owns Bytedance, the Chinese company that owns TikTok. Bytedance has been one of the most embattled companies this week as America’s House of Representatives voted to ban TikTok.
It is unclear whether the Senate will vote to ban the company. If it does, it could see TikTok sold in a fire sale, which could reduce its valuation. Complicating the issue is that China has warned that it will bar the company from being transferred to American investors.
Scottish Mortgage also has a big stake in PDD Holdings, the parent company of Temu. Its stock has dropped by almost 20% from its highest point in 2024. The company is facing substantial challenges as Temu’s growth slows. Recent data shows that traffic in the US has dropped sharply recently.
The fund also owns Kering, the parent company of Gucci. Kering has become one of the worst-performing luxury brand companies in Europe as Gucci sales fell.
Still, there are some bright spots in Scottish Mortgage’s portfolio. It has a large stake in Nvidia, a company whose stock has surged this year. It also owns Ferrari, an automaker that is thriving as the demand for luxury cars rise.
Scottish Mortgage also has stakes in ASML, Amazon, and Wise, the fintech giant. All these companies have done well this year.
In one of my previous reports on SMT, I wrote that there were better alternatives in the market like Invesco QQQ and even SPDR S&P 500 ETF (SPY).
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