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Homebuilders Recovery Select Portfolio, 27

The housing bubble popped in 2008 as banks issued mortgages to many borrowers with questionable credit, which in many cases has led to defaults and foreclosures. Lenders today take a much closer look at borrowers’ income history and their overall debt situation before approving a mortgage loan.

Since December 2008, the Federal Reserve has kept interest rates very low in an effort to make capital more readily available. The federal funds rate is the central bank’s key to stimulate the economy and a low rate is believed to encourage spending by making it cheaper to borrow money. We believe that the current low interest rate environment may provide a stimulus for consumers looking to purchase a home.

Portfolio Objective

The objective of this unit investment trust is to seek above-average capital appreciation by investing in the common stocks of companies involved in the home building industry; however, there is no assurance the objective will be met.

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Consider These Factors

  • Home prices nationwide increased 13% in April 2021 compared to April 2020. Strong demand, low mortgage interest rates and low supply has helped to push home prices higher.1


  • According to the U.S. Census Bureau, the homeownership rate was 65.6% in the first quarter of 2021, an increase of 2.1% from the first quarter of 2016.


  • The 2021 and 2022 consensus earnings‐per‐share estimates (in dollars) for the S&P Homebuilding Select Industry Index were $517.99 and $569.26, respectively, as of 6/8/2021, according to Bloomberg. Actual earnings totaled $355.76 per share in 2020. The S&P Homebuilding Select Industry Index provides investors with an equity benchmark for U.S. traded Homebuilding-related securities.


  • In May 2021, builder confidence in the market for newly built, single-family homes stood at a level of 83 compared to 16 just 10 years ago, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).*

*The index gauges expectations for future sales. Any number over 50 indicates that more builders view conditions as good than poor.

1CoreLogic


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 both the consumer discretionary and industrials sectors which involves additional risks, including limited diversification. The companies engaged in the consumer discretionary sector 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 construction industry are subject to competition, overcapacity, labor relations, a reduction in consumer spending, changing consumer spending habits, unseasonable weather conditions, and severe fluctuations in the price of basic building materials. 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.

One of the securities in the portfolio 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.

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 resulted in major disruptions to economies and markets around the world. Financial markets have experienced extreme volatility and severe losses, negatively impacting global economic growth prospects. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty and may exacerbate other political, social and economic risks.

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.

 
The information in the prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
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