Clean Energy Portfolio, Series 5
Clean energy is developed from renewable, zero-emissions sources, as well as energy that
is stored through energy efficiency measures. As opposed to coal and oil, clean energy does
not pollute the atmosphere. The clean energy industry generates hundreds of billions in
economic activity and is anticipated to grow rapidly in the coming years.1 The potential for
economic opportunity may exist for companies that invent, manufacture and export clean
Consider The following
- Renewable energy is estimated to be the fastest growing source of energy over the next 30 years, supported
by a significant increase in the development and investment of new wind and solar capacity.2
- The renewables share of U.S. generation is anticipated to increase from 20% in 2021 to 22%
in 2022. The increase is a result of planned additions to wind and solar generating capacity.3
- To revive economic growth in the wake of the COVID-19 pandemic, governments around the
world are planning to commit trillions in fiscal stimulus to this effort, much of which is going
toward clean and renewable energy projects.4
- A successful clean energy transition has the potential to generate approximately 65 million
new jobs worldwide and result in approximately $26 trillion in financial benefits by 2030.5
- Water scarcity is anticipated to increase in the future, with approximately 3.1 billion people
living in water-stressed regions by 2050.6
1 U.S. Department of Energy
2 BP Energy Outlook
3 U.S. Energy Information Administration
5 Choose Energy
6 United Nations World Water Department Report
This unit investment trust seeks above-average capital appreciation; however, there is no
assurance the objective will be met.
Portfolio Selection Process
An initial universe of stocks is created by selecting clean energy stocks that are involved in the
development, manufacturing, distribution and installation of clean energy technologies such as
solar, wind, water, bioenergy, nuclear and hydrogen & fuel cells. All of the stocks selected trade
on a U.S. stock exchange and have adequate liquidity for investment.
Next the historical financial results of the stocks from the initial universe are examined. 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 (third party)
analyst ratings, competitive advantages and quality of management. The stocks go through a
committee meeting and final selections, which best reflect the consensus, are most in-keeping
with portfolio objectives, trade at attractive valuations and in our opinion, are likely to exceed
The final portfolio is comprised of 30 approximately equally weighted clean energy 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 both the industrials and information technology sectors which involves 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. 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. There is no assurance that the projections stated herein will be realized.
Renewable and alternative energy companies can be significantly affected by obsolescence of existing
technology, short product cycles, legislation resulting in more strict government regulations and
enforcement policies, fluctuations in energy prices and supply and demand of alternative energy fuels,
energy conservation, the success of exploration projects, the supply of and demand for oil and gas, world
events and economic conditions. Shares of clean energy companies have been significantly more volatile
than shares of companies operating in other more established industries. This industry is relatively nascent
and under-researched in comparison to more established and mature sectors.
An investment in a portfolio containing equity securities of foreign issuers is subject to additional risks,
including currency fluctuations, political risks, withholding, the lack of adequate financial information, and
exchange control restrictions impacting foreign issuers. Risks associated with investing in foreign securities
may be more pronounced in emerging markets where the securities markets are substantially smaller, less
developed, less liquid, less regulated, and more volatile than the U.S. and developed foreign markets.
An investment in a portfolio containing small-cap and mid-cap companies is subject to additional risks, as
the share prices of small-cap companies and 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.
The COVID-19 global pandemic has caused significant volatility and declines in global financial markets, causing losses for investors. The development of vaccines has slowed the spread of the virus and allowed for the
resumption of “reasonably” normal business activity in the United States, although 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.
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.