James Anderson has delivered Scottish Mortgage shareholders a 25% uplift in his penultimate results as the investment trust’s manager.
The £21.7bn trust’s net asset value rose 16%, in the six-months ended 30 September, compared to the 9% increase for the FTSE All World index, while its share price was up 25.8%. Despite the positive results for shareholders, the results are significantly muted compared to the interim period in 2020 when the NAV leapt 76% compared with a 24% increase in the index.
Off the back of the latest results, the Scottish Mortgage board said it was recommending an interim dividend of 1.52p, a 5% increase over last year’s payment of 1.45p.
Stifel said it had been “another strong six months” for the trust as manager Anderson (pictured) “moves into the final lap”.
The next six months to the end of March will be Anderson’s last turn at the helm of Scottish Mortgage before he retires from Baillie Gifford. Tom Slater will continue to manage the trust alongside incoming deputy manager Lawrence Burns.
“We think co-manager Tom Slater is well positioned to continue the investment style which has been so successful in recent years, against a helpful market backdrop for this type of strategy,” Stifel said in an analyst note.
See also: Investors mull future of Scottish Mortgage without James Anderson
Moderna gains lift healthcare allocation to 21.4%
Writing in the trust’s interim results, Anderson and Slater, reiterated their belief that “long-term and exponential improvements in computing technologies, genomic sequencing and energy storage” were the most important drivers of long-term returns.
“Powerful trends” in computing technologies show no signs of slowing and have been broadening in utility and application beyond the “narrow remits of consumer internet” to other industries, including healthcare.
The trust’s allocation to healthcare companies has ballooned from 11.6% a year ago to 21.4% and Moderna has been the “greatest contributor to this change,” they said.
Moderna replaced Tencent as the trust’s largest holding at the end of September, representing 9.2% of total assets. However, its weighting has fallen to 6.3% of the portfolio, according to Jefferies, after seeing a third of its value wiped last week after slashing sales forecasts for its Covid-19 vaccine.
Anderson and Slater said the “breadth and scalability” of Moderna’s mRNA technology platform rather than its Covid vaccine “holds the greatest promise”. “Its pipeline of programs is both large and growing, targeting diseases such as flu, Zika, HIV, cancer and many more.”
They also highlighted portfolio holdings Recursion Pharmaceuticals and Tempus, which are leveraging big data and machine learning in drug discovery and cancer treatment, as well as unlisted stock 10x Genomics, a new holding added over the period, as examples of this trend.
Scottish Mortgage China bets sour
The trust’s managers said they were still positive on China, despite the government clampdown on the tech sector.
Top 10 holdings Tencent and Meituan were among the biggest negative contributors to Scottish Mortgage’s performance over the interim period after their share prices were battered. Alibaba, which saw its shares fall 35%, was the biggest hindrance to performance, losing the trust 1.5% on an absolute basis.
Despite this Anderson and Slater said the underlying progress of the companies “remains surprisingly strong,” with Alibaba and Tencent continuing to grow revenues above 20%.
“The companies themselves are keenly aware of their need to contribute not just to shareholder returns but to society to ensure true sustainability,” they said. “We will continue to assess the long-term implications of the new regulatory approach as they apply to each of our holdings.”
See also: Baillie Gifford funds swept up in China tech sell-off