SMIT sticks to portfolio but sells down Amazon
Scottish Mortgage Investment Trust manager Tom Slater said it is reinvesting capital from Amazon as the growth outlook weakens and founder Jeff Bezos steps back.
In a statement with full-year results Mr Slater said the Baillie Gifford-owned trust had “not made meaningful changes to the portfolio” despite market turmoil and still owns all the top 30 stocks it owned a year ago. The trust’s biggest holding is Moderna, the US business behind a Covid-19 vaccine.
However, he said Amazon had been sold down and it had made a “mistake” reducing its holdings in western online platform companies such as Facebook owner Meta and Google owner Alphabet rather than their Chinese counterparts. The Beijing government put mounting regulatory pressure on Chinese technology companies, causing sharp falls in their share prices.
Shares in the trust are down 32% over the last 12 months and it recently lost its position as the largest in the UK to 3i as tech stocks in which it invested have plummeted. At the close of today’s session the shares were 18.40p (2.36%) lower at 759.5p.
“The most significant reduction has been Amazon, our largest holding for many years,” said Mr Slater.
“We still have enormous respect for the company and believe it has a substantial opportunity ahead of it, particularly in providing cloud infrastructure through Amazon Web Services. However, founder Jeff Bezos stepping back from the CEO role is a source of concern given how central he has been to the corporate culture.
“At the same time, the maths of future growth is more challenging. E-commerce has grown from 5% to 15% of the US retail market over the past ten years, tripling the market for online retailers.
“Suppose e-commerce takes another ten percentage points of market share over the next decade. In that case, the opportunity will only have grown by two thirds. Given our focus on Growth, it now makes sense for us to redeploy capital in other areas.”
Commenting on geopolitical events, chairman Fiona McBain said: “One must not let the stress induced by such volatility shorten time horizons or prompt decisions taken to reduce discomfort, to the potential detriment of maximising long term shareholder value.”
The trust reported a 14.3% decline in the value of its assets for the year to end-March as manager James Anderson stepped down after 22 years.