American Recovery Portfolio, Series 20
The American Recovery Portfolio is a unit investment trust that invests in common stocks across
the following sectors: energy, financials, health care, industrials and information technology. Our
goal with this portfolio is to choose well-capitalized companies with strong market positions.
One important advantage that well-capitalized companies enjoy over others is that they have
the potential to provide their stockholders with a greater degree of stability and performance
over time.
Through our selection process, we seek to find companies with the following qualities:
- Well-capitalized with strong balance sheets;
- Skilled management;
- High liquidity;
- Ability to generate earnings growth; and
- Record of financial strength and profit growth.
Consider The Following
- Energy | According to the U.S. Energy Information Administration, global consumption of
petroleum and other liquids is projected to reach approximately 103.1 million barrels per day
(b/d) in 2024 and increase to 104.4 million b/d in 2025. U.S. crude oil production is estimated
to average 13.2 million b/d in 2024 and 13.5 million b/d in 2025.
- Financials | The financials sector covers a wide range of industries including banks,
investment banking, brokerage, consumer finance and credit and insurance. Industry
consolidation has had a notable impact within the sector with potential benefits such as
improved efficiency, lower operating costs, and increased volume. This trend could continue
to play an important role as institutions react to regulatory mandates and competitive
opportunities both in the U.S. and abroad.
- Health Care | From 2023-2032, it is projected that health care spending will grow at an
average rate of 5.6% annually.1 In the last decade, biopharmaceutical companies have invested
more than $1 trillion in research and development. In addition, there are currently approximately
8,000 medicines in clinical development around the world. Of these, nearly 70% have the potential to
be first-in-class treatments, which represents an entirely new approach to treating a disease.2
- Industrials | For many decades, American companies sent their manufacturing work
overseas. But today, in a trend known as “reshoring,” many companies are bringing their
manufacturing back to the U.S. We believe the U.S. may have a competitive advantage over
other countries, which could potentially allow U.S. industrial and manufacturing companies
to gain market share.
- Information Technology | In 2024, Gartner forecasts worldwide software spending to
grow 12.6% to almost $1.1 trillion and global IT services spending to grow 7.1% to over $1.6
trillion. In addition, global end-user spending on public cloud services is anticipated to exceed
$1.1 trillion in 2027, growing at a 19.6% five-year compound annual growth rate (CAGR).
1 CMS.gov
2 PhRMA
The Russell 3000 Index is an unmanaged index used to measure the performance of the largest 3000 U.S.
stocks based on total market capitalization. The index cannot be purchased directly by investors.
Portfolio Objective
This unit investment trust seeks above-average capital appreciation; however, there is no
assurance the objective will be met.
Portfolio Selection Process
We begin with the Russell 3000 Index to create an initial universe of stocks with a market-cap
above $10 billion that are in the sectors listed above. Next we examine the historical financial
results of the stocks from the initial universe. The stocks are then evaluated using fundamental
factors such as sales, earnings and cash flow growth; valuation factors such as price/earnings,
price/cash flow, price/sales and price/book; and technical factors such as price momentum and
earnings surprises.
An estimated value is calculated for each of the companies utilizing a Cash Flow Return on
Investment (CFROI) method. A secondary valuation is also made employing a concept called
Economic Margin. The companies which currently trade at an attractive market price relative to
their estimated value are favored over companies that do not.
The final portfolio is then selected by a team of equity analysts who evaluate each stock by
examining the stock’s relative valuation and other qualitative factors such as competitive
advantages, new products and quality of management.
Our selection process attempts to find the stocks with the best prospects for above-average
capital appreciation by identifying those that meet our investment objectives, trade at attractive
valuations, and, in our opinion, are likely to exceed market expectations of future cash flows.
The final portfolio is comprised of 40 approximately equally weighted American Recovery stocks.
| Not FDIC Insured • Not Bank Guaranteed • May Lose Value |
You should consider the portfolio's investment objectives, risks, and
charges and expenses carefully before investing. Contact your financial professional
or call First Trust Portfolios, L.P. at 1.800.621.1675 to request a prospectus,
which contains this and other information about the portfolio. Read it carefully
before you invest.
Risk Considerations
An investment in this unmanaged unit investment trust should be made with an understanding of the risks involved with owning common stocks, such as an economic recession and the
possible deterioration of either the financial condition of the issuers of the equity securities or the general condition of the stock market.
You should be aware that the portfolio is concentrated in stocks in the information technology sector which involves additional risks, including limited diversification. The companies engaged in the information technology
sector are subject to fierce competition, high research and development costs, and their products and services may be subject to rapid obsolescence. Technology company stocks, especially those which are Internet-related,
may experience extreme price and volume fluctuations that are often unrelated to their operating performance.
Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers.
An investment in a portfolio containing mid-cap companies is subject to additional risks, as the share prices of certain mid-cap companies are often more volatile than those of larger companies due to several factors, including
limited trading volumes, products, financial resources, management inexperience and less publicly available information.
Large capitalization companies may grow at a slower rate than the overall market.
As the use of Internet technology has become more prevalent in the course of business, the trust has become more susceptible to potential operational risks through breaches in cybersecurity.
Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East, have caused and could continue to cause significant market disruptions and volatility
within the markets in Russia, Europe, the Middle East and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.
The ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future variants of the disease.
The value of the securities held by the trust may be subject to
steep declines or increased volatility due to changes in
performance or perception of the issuers.
This UIT is a buy and hold strategy and investors should consider their ability to hold the trust until maturity. There may be tax consequences unless units are purchased in an IRA or other qualified plan.