Scottish Mortgage has sold 80 per cent of its shares in Tesla over the past year as the UK’s largest investment trust exited positions in other Silicon Valley stars and boosted its exposure to China.
The electric carmaker was Scottish Mortgage’s fifth-largest holding at the end of March, down from second place a year earlier, after the Baillie Gifford flagship trust took profits on its longtime investment in the company.
The trust’s co-manager Tom Slater said the sale of Tesla shares was intended to keep it diversified and that there was “intense” competition for capital to invest in new growth opportunities. He added: “The value that Tesla has created by addressing the need to decarbonise has forced a hostile investment community to reconsider its position.”
Scottish Mortgage, known for its long-term investments in high-growth companies, reported a record performance in its annual results with its valuation more than doubling to more than £18bn at the end of March. The net asset value of the FTSE All-World Index rose close to 40 per cent in the same period.
The trust increased its exposure to China during the year with stakes in tech giant Tencent — now its top holding — and food delivery group Meituan. Scottish Mortgage also has a private holding in Ant and said it expected tensions with Chinese regulators that halted the payments company’s IPO last year would be diffused in the coming months.
“The pace of innovation at scale in China now exceeds anything we can find in the rest of the world,” Slater said.
The trust has sold its stakes in Facebook and Google’s parent company Alphabet, as well as reducing its holding in Amazon. Slater said there were questions over how the companies would “retain their growth credentials at vast scale” while the departure of Jeff Bezos as Amazon chief executive added to the managers’ concerns. The ecommerce group had been its top holding in March 2020 but is now its fourth.
“Only in recent months has our enthusiasm waned,” said co-manager James Anderson, who will step down next April after 20 years at the trust’s helm.
Baillie Gifford, which was once Tesla’s largest independent shareholder, reduced its overall stake in September to comply with guidelines about the weight of a single stock in clients’ portfolios. Anderson said at the time that the group intended to remain a large shareholder for “many years”.
But Scottish Mortgage is still making a positive bet on the future of electric vehicles having taken new stakes in smaller companies related to the sector, including Swedish battery-maker Northvolt and US charging network ChargePoint.
The group declined to comment on Elon Musk’s reversal on accepting Bitcoin in payment for Tesla cars over environment concerns around the cryptocurrency.
Simon Elliott, an analyst at Winterflood, said the trust was “pretty good at recycling” profits from successful investments into new bets. “If they didn’t believe in the Tesla story any more they would have sold out, plain and simple,” he said.
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