Investment trust Scottish Mortgage (SMT) has sold over 40% of the shares it owns in electric carmaker Tesla and invested more into other electric vehicle related stocks.
In its half-year report for the six months to 30 September, Scottish Mortgage said it had raised £1.18 billion after slashing some of its stake to ensure the fund still has an ‘appropriate’ level of diversification, though Tesla is still the largest holding and accounts for 12% of the portfolio.
During the period, the trust’s net asset value per share with debt at fair value (NAV) rose by 76% compared to a 24% increase in the index, while over five years its net asset value per share with debt at fair value increased by 340% versus a 96% increase in the FTSE All-World index (both in total return terms).
Its board is also recommending to increase its 2021 interim dividend to 1.45p, a modest increase from the 2020 interim dividend of 1.39p.
SCOTTISH MORTGAGE DEFENDS TESLA STAKE
Scottish Mortgage defended its stake in Tesla and said the company has made ‘significant operational progress’ this year. Tesla contributed 24.8% to the trust’s absolute performance in the half-year to 30 September.
The trust added that Tesla has ‘successfully added capacity and the production ramp of its latest model has progressed far more smoothly than for any of its previous vehicles. Demand for its products is strong and the response from its traditional competitors remains muted.’
But the trust has also made investments into other EV-related stocks, including ChargePoint, one of the world’s largest electric vehicle charging networks, and Nio, the Chinese electric vehicle manufacturer.
The latter had struggled significantly since its IPO in 2018 up until the middle of this year, but its shares have exploded since June and the stock has become a 10-bagger in less than six months, with a market cap now similar to American car giant General Motors.
Scottish Mortgage said Nio is now ‘back on track’ after difficult trading conditions in the year and a half following its IPO and added that its balance sheet has been strengthened by continued investment from its founder and through local government support.
AMAZON STAKE REDUCED, FACEBOOK SOLD
Also grabbing headlines from today’s report has been Scottish Mortgage’s decision to reduce its holding on Amazon for a reason other than diversification purposes.
The trust said, ‘Whilst we have huge respect for Amazon's vision and ability to execute, its starting capitalisation of over $1.5 trillion makes the path to large future returns more challenging.’
It also sold out of Facebook and invested more into food delivery companies Meituan and Delivery Hero, as well as American e-commerce company Wayfair.
‘The examples of Wayfair, Delivery Hero and Meituan serve to illustrate the growing number of opportunities we have to invest in digital businesses of scale beyond the giant western platforms. This becomes more important as our views on the platform companies are less differentiated than was once the case,’ Scottish Mortgage said.
