Target Double Play Portfolio, 4th Quarter 2019 Series
Finding the right mix of investments is a key factor to successful investing. Because different investments often react differently to economic and market changes, diversifying among low-correlated investments primarily helps to reduce volatility and also has the potential to enhance your returns. Target Dbl. Play (Target Double Play Portfolio) has been developed to seek to address this purpose.
The Target Double Play Portfolio is a unit investment trust which consists
of an approximately equal weighting between two strategies – The Dow®
Target Dividend Strategy and the Value Line® Target 25 Strategy.
It invests in a fixed portfolio of stocks which are selected by applying pre-determined
screens and factors and holds the stocks for approximately 15 months. The portfolio
offers several important advantages:
- Complete transparency from the stock selection process to portfolio holdings
and individual stock weightings;
- Automated buy decisions helping to eliminate unwanted emotions from the
- No style drift from manager-driven trading;
- Low cash positions so more of your money is put to work;
- Diversification, discipline, and a periodic rebalancing opportunity helping
to decrease volatility and potentially increase returns.
As you can see in the charts below, if this strategy had been applied since 1992, investors
would have realized higher total returns than by investing in the S&P 500 Index. It is
important to note that the past performance of the strategy is hypothetical and it is not
indicative of the future performance of the Target Double Play Portfolio. Diversification does
not guarantee a profit or protect against loss.
History has shown that bear and bull markets are a normal occurrence. Although past
performance is no guarantee of future results, history has also shown that equity investors
have been rewarded for their patience over the long-term. The chart below illustrates this
point based on applying the hypothetical strategy over one year and three year periods. Of
course, there is no guarantee that the performance of the strategy or the trust will be
positive over any future time period.
Portfolio Selection Process
The Target Double Play Portfolio seeks above-average total return by adhering to a simple investment strategy; however, there is no assurance the objective will be met. On the initial date of
deposit, the portfolio is approximately equally weighted between the two strategies described below.
The Dow® Target Dividend Strategy
- Begin with the stocks that comprise the Dow Jones Select Dividend IndexSM.
The index consists of 100 widely-traded, dividend-paying stocks derived from
the Dow Jones U.S. Total Market IndexSM.
- Rank each of the 100 stocks on two factors:
- Rank each of the 100 stocks on two factors:
- Change in return on assets over the last 12 months. An increase in return on assets is generally used as an indication of improving business fundamentals and would receive a higher ranking than a stock with a negative change in return on assets.
- Price to book. A lower, but positive, price to book ratio is generally used as an indication of value.
- Purchase an approximately equally-weighted portfolio of the 20 stocks with
the best overall ranking on the two factors.
Value Line® Target 25 Strategy
- Begin with the 100 stocks that Value Line® currently gives a #1 ranking
for TimelinessTM (stocks of financial companies and companies whose shares
are not listed on a U.S. exchange are not eligible for inclusion in the Value
Line® Target 25 Strategy). Value Line® ranks approximately 1,700 stocks, only
100 of which are given their #1 ranking for TimelinessTM. They base their
rankings on a long-term trend of earnings, prices, recent earnings, price
momentum, and earnings surprises.
- Rank the stocks on four factors:
- 12 month price appreciation
- 6 month price appreciation
- Return on assets
- Price to cash flow
- Purchase a market cap-weighted portfolio of the 25 eligible stocks with
the best overall ranking on the factors, subject to a minimum weighting of
approximately 1% and a maximum weighting of approximately 25%.
| Standard Deviations*
|| Average Annual Total Returns*
|Annual Total Returns
Past performance is no guarantee of future results and the actual current
performance of the portfolio may be lower or higher than the hypothetical performance
of the strategy. Hypothetical returns for the strategy in certain years were
significantly higher than the returns of the S&P 500 Index. Hypothetical strategy
returns were the result of certain market factors and events which may not be
replicated in the future. You can obtain performance information which is current
through the most recent month-end by calling First Trust Portfolios L.P. at
1-800-621-1675 option 2. Investment return and principal value of the portfolio
will fluctuate causing units of the portfolio, when redeemed, to be worth more
or less than their original cost.
Simulated strategy returns are hypothetical, meaning that they do not represent actual trading, and, thus, may not reflect material economic and market factors, such as liquidity constraints, that may have had an impact on actual decision making. The hypothetical performance is the retroactive application of the strategy designed with the full benefit of hindsight. Strategy returns reflect a sales
charge of 1.85% and estimated annual operating expenses of 0.185%, plus organization costs, but not taxes or commissions paid by the portfolio to purchase securities. Returns assume that all dividends received during a year are reinvested monthly. Actual portfolio performance will vary from that of investing in the strategy stocks because it may not be invested equally in these stocks and may not be fully invested at all times. It is important to note that the strategy may underperform the S&P 500 Index in certain years and may produce negative results.
The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap
U.S. stock market performance. The index cannot be purchased directly by investors.
Standard Deviation is a measure of price variability (risk). A higher degree of variability indicates more volatility and therefore greater risk.
| 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 advisor
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 consumer products
and financials sectors which involves additional risks, including limited diversification. The
companies engaged in the consumer products industry are subject to global competition,
changing government regulations and trade policies, currency fluctuations, and the financial and
political risks inherent in producing products for foreign markets. The companies engaged in the
financials sector are subject to the adverse effects of volatile interest rates, economic recession,
decreases in the availability of capital, increased competition from new entrants in the field, and
potential increased regulation.
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
One of the common stocks held by the trust is issued by a foreign entity. 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.
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 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.
The Dow Jones U.S. Select Dividend IndexSM is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI") and have been licensed for use by First Trust Portfolios L.P. Standard & Poor's® and S&P® are registered
trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by SPDJI and
sublicensed for certain purposes by First Trust Portfolios L.P. The Target Double Play Portfolio, which contains the Dow® Target Dividend Strategy is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their
respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product nor do they have any liability for any errors, omissions, or interruptions of the Dow Jones U.S.
Select Dividend IndexSM.
“Value Line,” “The Value Line Investment Survey,” and “Timeliness” are trademarks or registered trademarks of Value Line, Inc. (“Value Line”) and have been licensed for use for certain purposes by First Trust Portfolios L.P. The
Target Double Play Portfolio is not sponsored, endorsed, recommended, sold or promoted by Value Line and Value Line makes no representation regarding the advisability of investing in products utilizing such strategy. First
Trust Portfolios L.P. is not affiliated with any Value Line company.