American Recovery Portfolio, Series 11
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
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, the global consumption
of petroleum and liquid fuels in 2022 is projected to grow by 2.1 million barrels per day (b/d)
from 2021. U.S. crude oil production is estimated to be 11.8 million b/d in 2022 and 12.6
million b/d in 2023 which would set a record for the most U.S. crude oil production in a year.
The current record is 12.3 b/d set in 2019.
- Financials | The financials sector covers a wide range of industries including banks,
investment banking, brokerage, consumer finance and credit and insurance. From 1927 to
2021, the financials sector saw an average annual total real return of 6.7% vs. 4.9% for the
S&P 500 Index during years when inflation was greater than the median consumer price index
(CPI) of 2.6% at year-end.
- Health Care | From 2021-2030, it is projected that health care spending will grow at an
average rate of 5.1% annually.2 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, 74% have the potential to
be first-in-class treatments, which represents an entirely new approach to treating a disease.3
- Industrials | For third quarter 2022, industrials are expected to post year-over-year (YOY)
earnings per share growth of 22.6% with an expected revenue growth of 14.5% YOY. Ten of
the twelve industries that comprise the sector are expected to report a YOY increase in profit,
including aerospace & defense, machinery, and building products.4
- Information Technology | In 2022, Gartner forecasts worldwide software spending to
grow 9.6% to $806.8 billion and global IT services spending to reach $1.3 trillion. In addition,
global end-user spending on public cloud services is anticipated to reach $494.7 billion in
2022, up from $410.9 billion in 2021. End-user spending is projected to reach nearly $600
billion in 2023.
1 Ken French Data Library, Bloomberg. As of 12/31/21. Universe includes all NYSE, AMEX & Nasdaq stocks.
4 Capital IQ, as of 9/21/22
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.
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
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.
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 health care sector which involves
additional risks, including limited diversification. The companies engaged in the health care sector are
subject to fierce competition, high research and development costs, governmental regulations, loss of patent
protection, and changing consumer spending trends. In addition, health crises, such as a pandemic outbreak,
can severely impact the health care industry in particular..
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 has caused and may continue to cause significant volatility and declines 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 unit investment trust 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.