Travel and Destination Portfolio, Series 2
Since March 2020 the travel and tourism industry has been suppressed due to the coronavirus pandemic. However, rising vaccination rates, increasing recovery from infections, FDA vaccine approvals and
up-and-coming pharmaceutical development of inoculations for children are all contributing to traveler enthusiasm.
Consider The Following
- U.S. travel spending is anticipated to reach $1.22 trillion in 2025 compared to $680 billion
in 2020. The 2025 forecast number is higher than the level reached in 2019 at 1.17 trillion.1
- Consumer spending on cruise travel in the U.S. increased by 142% from January 3rd to July
18th, 2021, compared to the same period in 2020.2
- In the second quarter of 2021, casino gaming revenue hit an all-time record of $13.6 billion
which is the industry’s highest-grossing quarter ever.3
- On an average day in 2019, approximately 95% of Americans aged 15 years and over were
engaged in some type of leisure activity. On average, adults 75 years and over spent 7.7 hours
per day engaged in leisure activities which represents more than any other age group.4
- In June 2021, airlines scheduled and operated more flights than any month since the start
of the pandemic in March 2020. Total passengers reached 66.4 million, up 304% from
Portfolio Selection Process
An initial universe of stocks is created by selecting travel & destination stocks that have adequate
liquidity for investment. The following industries are included: airlines, casinos & gaming,
hotels, resorts & cruise lines, interactive media & services, leisure facilities and trucking.
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 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 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 25 equally weighted travel & destination stocks.
This unit investment trust seeks above-average capital appreciation; however, there is no
assurance the objective will be met.
1U.S. Travel Association
3American Gaming Association
4,5U.S. Bureau of Labor Statistics
|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 consumer discretionary sector which involves additional risks, including limited diversification. The companies engaged in the consumer discretionary
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.
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 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.
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.