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Scottish Mortgage tops FTSE as Amazon amazes

Global investment trust jumps to top of FTSE 100 as top holding Amazon smashes profit expectations.

Scottish Mortgage tops FTSE as Amazon amazes

Scottish Mortgage (SMT) has jumped to the top of the FTSE 100 after the global investment trust's top holding Amazon (AMZN.O) smashed expectations, more than doubling profits in the first quarter.

Shares in Scottish Mortgage jumped 2.3% to 471.6p, leading the FTSE 100, which rose 39 points, or 0.5%, to 7,460, buoyed by the pound's fall on weak UK economic growth data.

Amazon is the top holding for the £6.5 billion trust, representing 9.9% of the portfolio.

Shares in the world's largest online retailer surged 7% in pre-market trading to a new record high, as it said it expected profits of between $1.1 billion (£800 million) and $1.9 billion in the quarter, up from $628 million a year earlier. Sales jumped 43% to $51 billion.

Chinese internet search giant Baidu (BIDU.O), the trust's sixth largest holding, also provided a boost after a big jump in profits powered a 5.9% rally in the shares in pre-market trading.

Adding to the momentum was a continued climb in the shares of Facebook (FB.O) yesterday, as a stellar set of results calmed nerves of the fallout from the social media giant's data scandal.

Shares in Facebook rallied 9% yesterday, further buoying Scottish Mortgage, although the stock is no longer a top 10 holding for the trust.

That news is also likely to be welcomed by Citywire AAA-rated Terry Smith, manager of the £13.4 billion Fundsmith Equity fund, who bought Facebook earlier this year.

Stephen Yiu, who has a top 10 holding in Facebook in his £43 million Blue Whale Growth fund, hailed news of a 63% jump in quarterly profits.

'Facebook is an entrenched element of day-to-day life for billions of people. The idea a hoard of users would head for the exit door after some faux outrage and virtue-signalling hashtags from pointless C-list celebrities was ridiculous,' he said.

'Once you also account for Instagram and WhatsApp, the Facebook empire looks as strong as ever and should continue to benefit from the structural shift to digital advertising.'

Royal Bank of Scotland (RBS) meanwhile fell to the bottom of the FTSE 100, down 2.1% at 266.9p despite first-quarter profits of £792 million, almost double what investors had been expecting.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said investors were wary of a fall in loan margins.

'Income growth is being driven by trading activity – which is by its very nature volatile and unpredictable and so might not turn up next time round,' he said.

'Meanwhile loans to customers, the bread and butter of a retail bank, are shrinking and an increasingly competitive UK mortgage market means the bank isn’t earning the same turn on loans that it used to.'

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Terry Smith
Terry Smith Average Total Return:
11/480 in Equity - Global (Performance over 3 years)

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