Homebuilders Recovery Select Portfolio, 26
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.
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.
Consider These Factors
- Home prices nationwide, including distressed sales, increased 10% in January 2021 compared
to January 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 65.8% in the fourth
quarter of 2020, an increase of 2.0% from the fourth quarter of 2015.
- The 2021, 2022 and 2023 consensus earnings‐per‐share estimates (in dollars) for the S&P
Homebuilding Select Industry Index were $439.29, $487.68 and 496.95, respectively, as of
2/3/2021, according to Bloomberg. Actual earnings totaled $356.58 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 February 2021, builder confidence in the market for newly built, single-family homes stood
at a level of 84 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.
|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 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.