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MANGO Stocks: Flavour Of The Month Or Long Term Blue Chip Contenders? – Forbes

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The investment industry is littered with acronyms. Down the years, numerous countries, industrial sectors and individual companies have made it on to the fashionable investing catwalk, although not all have managed to stay there. 
First it was the TMTs (Technology, Media and Telecoms companies), followed by the BRICs (Brazil, Russia, India and China) and, finally, FAANG stocks (Facebook/Meta, Amazon, Apple, Netflix and Google/Alphabet).
Investors have now shifted their focus to a new cohort – the MANGOs (see list below). We take a look at the names behind the acronym and ask whether this sector is the next big investing theme.
The acronym comprises a handful of US companies that design or manufacture semiconductor chips. 
Each of these companies is listed on the Nasdaq, the US stock market index with a bias towards technology companies.The MANGOs acronym contains a bit of poetic licence, but its name is derived from the three-letter stock market ticker symbol that identifies each of these companies on the exchange.
Here’s a closer look at the MANGOs:
It makes sense to invest in industrial sectors that demonstrate high and sustained demand. The semiconductor marketplace displays both of these characteristics .
Demand for semiconductors – or chips – has soared due to their rising indispensability in consumer electronic products. 
AJ Bell’s Russ Mould says: “Semiconductors are vital to any electronic or electrical gadget of which you can think, from smartphones to smart meters, cars to telecom equipment and laptop computers to industrial robots.”
Global semiconductor sales hit a record high of $556 (£448) billion in 2021, an increase of 26% from 2020, according to the Semiconductor Industry Association. Boston Consulting Group says semiconductors are the fourth most-traded product globally. 
Semiconductors may be in high demand, but companies operating in this space are subject to the same pressures as other industries.
MANGOs faced strong headwinds during the pandemic due (ironically) to chip shortages and through supply chain issues. 
While the MANGOs may be ramping up the supply of semiconductors to address the current shortfall, it takes years and billions of dollars to build fabrication plants. 
Russ Mould comments that: “Fine-tuning new supply is hard and the risk is eventually chipmakers overdo it.” 
An excess of supply, coupled with a fall in demand, may present a significant risk for potential investors.
One option is to invest directly by buying shares in the MANGO companies. 
Most investing platforms allow you to buy US shares although, in addition to the share trading fee, you will be charged a foreign exchange fee (typically around 1% of the value of the transaction) unless you fund the purchase from a US dollar account. 
You will also be asked to complete a W-8BEN form to reduce the withholding tax on dividends.
Holding US shares also carries exposure to foreign exchange risk. If the pound strengthens against the dollar, your shares will be worth less in sterling (and vice versa).
As with UK shares, any profit on US shares will be subject to Capital Gains Tax, unless you hold the shares in an Individual Savings Account or Self-Invested Personal Pension.
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Another option is to invest indirectly in the MANGO companies, via a fund, investment trust or exchange-traded fund (ETF) that has holdings in some of the MANGOs. These investments aggregate investors’ contributions into one large pool of money that’s managed on their behalf by a professional investment firm. 
Investing indirectly via one of these investments provides a ready-made portfolio that reduces the risk when individual companies underperform. 
Two funds that contain exposure to MANGO companies include:
There are two types of returns for shareholders – income in the form of dividends, and capital growth from any increase in the company’s share price. 
The following table shows the total returns (with profits reinvested) that shareholders would have received from holding MANGO shares over the past 5 years (as at May 2022):
On average, shareholders would have enjoyed total returns ranging from 16% to 49% over the last five years (as at May 2022). However, these returns are far lower than the Nasdaq Composite Index, which achieved five year returns of over 200% over the same period (according to data from Nasdaq).
In terms of income, most of the MANGO companies either don’t pay a dividend, or pay only a small one. As a result, they are likely to appeal to shareholders looking for capital growth, rather than a regular income stream. 
All of the MANGOs have suffered a decline in share price of at least 10% since the beginning of 2022, with falls of over 35% for NVIDIA, Advanced Micro Devices and Marvell Technology.
The Philadelphia Semiconductor Index (SOX), which tracks the share prices of US semiconductor companies, has fallen by 25% since its high in December 2021. 
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, says: “Chip makers have not been immune to the waves of volatility crashing over the tech sector as investors try and shake out the true value of companies in an era when the crutch of easy borrowing is coming to an end, and the risks of ups and downs in the short term are unlikely to fade any time soon.”
In terms of short-term outlook, JP Morgan says “semiconductor companies are in a unique situation, constrained by supply, not demand.” 
However, supply shortages are expected to start to ease in 2022. As mentioned earlier, there is also a risk that the long lead-time in increasing production capacity creates excess supply (over demand) once the new facilities come on-stream. 
Also, high inflation and rising interest rates may take their toll on the pent-up demand for consumer electronics from the pandemic, although their reliance on sophisticated chip technology continues to increase. 
Some of the MANGOs have already diversified beyond consumer electronics into other areas such as cloud and artificial intelligence products. Hargreaves Lansdown’s Streeter says: “As firms look to the cloud to find more efficiencies, particularly in an era of high inflation, companies like NVIDIA and Marvell Technology, with their data centres businesses, are well placed to capitalise.”
Overall, global sales for the industry are forecast to continue to grow to $700 (£565) billion by 2023, according to research house Gartner. This should provide impetus to the MANGO stocks, for the short-term at least.
Aside from semiconductors, there is a range of funds that can provide you with exposure to the wider technology sector. 
For example, within the Investment Association Technology sector, Fidelity’s Global Technology fund achieved a 5-year return of 150% (as at May 2022), according to Trustnet. 
The rising demand for semiconductors looks set to continue, at least in the short term. However, it remains to be seen whether current economic conditions start to take their toll on demand for consumer electronics, and the stock market valuations of the MANGOs more broadly. 
AJ Bell’s Russ Mould says investing acronyms are good fun as marketing narratives but adds that “BRIC, MINT (Mexico, Indonesia, Nigeria and Turkey) and FAANG all ended in tears”. 
He says investment return rests upon fundamentals and the valuation paid, not catchy acronyms: “There has to be a good chance that MANGOs gets squeezed at some stage, especially given some of the prevailing valuations.”
Investing in shares or share-based investments can be a good way to produce higher returns than cash-based investments. However, your investment can go down as well as up, and you may not get your money back. If you are unsure as to the right investment, you should seek financial advice.
Having worked in investment banking for over 20 years, I have turned my skills and experience to writing about all areas of personal finance. My aim is to help people develop the confidence and knowledge to take control of their own finances.

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Nitika is a MCA graduate and works as all-round news writer at The Hoops News. In free time, she works on Photoshop and plays GTA V on her Xbox. A tech-enthusiast at heart, she explores ways that businesses can leverage the Internet and move their businesses to the next level. You can contact her at nitika@thehoopsnews.com.