American Heroes Portfolio, Series 2
Each year men and women in the military transition from active or reserve military status to veteran. As of 9/30/22, there were 18.6 million veterans in the United States. The American Heroes Portfolio
is a unit investment trust which invests in companies chosen from the Veterans Select IndexSM. The companies in the index have been selected for their support of military veterans, service members and
their families through the creation of employment opportunities and development of employment policies.
The Veterans Select IndexSM was designed by VETS Indexes LLC. The index measures the performance of publicly traded companies that support U.S. military veterans through employment. The eligible
universe of companies is maintained and populated from a variety of sources, including annual rankings, survey and recognition programs. There are various selection criteria, such as company culture,
policies and reservist accommodations to identify these companies. In addition, these companies manage their risks and opportunities related to environmental, social and governance (ESG) issues.
Index Selection Criteria
To be included in the Veterans Select IndexSM, a company must be publicly traded and:
The composition of the portfolio will not be adjusted to reflect any subsequent changes in the
index during the life of the portfolio. It is important to note that the performance of the portfolio
is not intended or expected to mirror the index for several reasons, including the fact that there
are sales charges and expenses associated with an investment in the portfolio that are not
associated with the index.
Consider The Following
- The veteran unemployment rate dropped to 2.7% in October 2022 compared to 5.9% in
- Chief executives who served as military officers represent over 8% of all CEOs in the S&P 500
Index, which is higher than the 3% average of the entire U.S. male population who served in
- Veterans receive world-class training from the U.S. Military. Research has shown that companies
that take advantage of such talent may help their own bottom lines in the long run.2
This unit investment trust seeks above-average capital appreciation; however, there is no
assurance the objective will be met.
Portfolio Selection Process
The initial universe of stocks is chosen directly from the Veterans Select IndexSM.
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;
technical factors such as price momentum and earnings surprises; and qualitative factors such as
competitive advantages, new products and quality of management.
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 (EM). EM measures the return a company earns versus its cost of capital to
determine if a company is generating wealth. The analysts use the estimated valuations calculated
by the CFROI and EM methods to determine which companies are trading at an attractive market
price relative to their estimated value. These companies are favored for inclusion in the portfolio
over companies that do not.
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 30 approximately equally weighted stocks.
The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The index cannot be purchased directly by investors. Past performance is no guarantee of future results.
VETS INDEXESSM and Veterans Select IndexSM are service marks of VETS Indexes LLC and have been licensed for use by the Sponsor. The Trust is not sponsored, endorsed, sold or promoted by VETS Indexes LLC and VETS Indexes LLC
makes no representation regarding the advisability of investing in the Trust.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should consider the portfolio's investment objective, 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.
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 industrials sector making it subject to additional risks, including limited diversification. The companies engaged in the industrials sector are subject to
certain risks, including a deterioration in the general state of the economy, intense competition, domestic and international politics, excess capacity and changing spending trends.
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.
In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, 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 COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has
resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging 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.
Although this portfolio terminates in approximately 15 months, the strategy is long-term. Investors should consider their ability to pursue investing in successive portfolios, if available. There may be tax consequences unless
units are purchased in an IRA or other qualified plan.