It has been a long time coming, but the Scottish Mortgage Investment Trust (LSE:SMT) share price hit a milestone earlier this week when it matched its 2021 pre-crash peak. This followed a 28.5% year-to-date surge that drove the stock to 1,540p.

Today (27 May), we got the growth trust’s results for the 12 months to 31 March. Here’s what investors should know from the report.

Star of the show

Last year, Scottish Mortgage’s net asset value (NAV) total return was 27.4% compared to the FTSE All-World Index‘s 18%. So it outperformed nicely during the period.

The star of the show was unlisted holding Space Exploration Technologies Corporation (aka SpaceX). At the end of March, it represented more than 19% of assets, up from 7.8% the year before.

On SpaceX, manager Tom Slater commented: “Though the launch vehicles generate the media attention, the valuation has been driven primarily by its satellite communications subsidiary, Starlink, which is building the kind of predictable, highly profitable revenue that the best software businesses aspire to. The difference is that its assets are in orbit and extraordinarily difficult to replicate“.

The trust invested £151m in SpaceX several years ago, and that holding is currently worth almost £3bn. This highlights perfectly the reasons for investing in transformative private companies, with these bets starting to pay off.

Other positive contributors to performance included TSMC (+99.1%), ASML (+94.2%), and Nvidia (+57.5%). All three firms are at the epicentre of the global AI infrastructure buildout.

The acceleration of artificial intelligence into a global infrastructure buildout is, in our judgment, the most important structural change in the global economy since the emergence of the internet, and we are still in its early stages.
Tom Slater.

Scottish Mortgage’s 10-year NAV total return of 435.2% comfortably beats the 233.9% generated by the FTSE All-World Index. But getting from A to B during this time has been far from comfortable, as the volatile share price chart shows.

Finally, the dividend was hiked 4.3% to 4.57p. While that only translates into a 0.3% yield, the trust is classed as an AIC Dividend Hero, having increased its payout for 43 straight years.

Where next?

Looking ahead, we’re about to enter a bit of a strange period once SpaceX goes public in June. Because to manage risk, the trust’s huge holding will surely have to be reduced whenever restrictions are lifted on the selling of shares.

But rather than a straight 180 days, SpaceX has proposed a rather unusual schedule. Upon Q2 results (around August/September), existing investors can sell up to 20% of their shares. But if the stock is doing well, it will be 30%.

Then Q3 (October/November) will see another 28% unlocked, before the 180 days elapse around Christmas. Adding to the complexity, there will also be various time-based slots to sell smaller positions.

Throughout the summer then, the Scottish Mortgage share price could be buffeted about by what’s happening with SpaceX. This adds risk, especially if the IPO is poorly received on valuation grounds.

To finish, it’s worth mentioning that the NAV discount that Scottish Mortgage has spent the last four years trading at has disappeared. Indeed, there’s now a 6.3% premium.

Long term, I’m still bullish, but investors considering the stock should recognise the near-term risks with SpaceX.

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Ben McPoland owns shares in Nvidia, Scottish Mortgage, and TSMC.