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Dolls And Dogs: Our List Of Emerging Markets To Invest In (And To Avoid)

With one-third of 2016 already behind us, we review the major stock market indices in frontier and emerging countries. Where were the returns strongest – and more importantly, what are the best ways for investors to get involved? After a long period in the darkness, investors in emerging markets have lately had reason to perk up. Contrast that with last year, when global equity investors had few places to hide. US markets barely broke even in nominal terms, and even incurred a small loss when factoring for inflation. Pain was evident in other developed markets, as major European indices also ended the year lower. Yet these lackluster performances paled in comparison to the bloodbath in emerging markets. Note the comparisons below, as displayed with the most liquid ETFs that track each relevant index: Ticker Name 2015 Performance (%) SPY SPDR S&P 500 ETF Trust 0.02% VGK Vanguard FTSE Europe ETF -4.83% EEM iShares MSCI Emerging Markets Indx ETF -18.01% FM iShares MSCI Frontier Markets 100 ETF -19.19% Data calculated as of market close on 5 May 2016 The opening days of 2016 saw that malaise transform into outright fear, as January proved to be one of the most brutal months in recent memory. US Fed Chairwoman Yellen’s decision to raise US rates at the end of December (an ill-advised tactic, as I wrote back in October) sparked a rush for the exits of stock exchanges around the globe. US and European markets lost nearly 10% of their value, while the carnage in major emerging and frontier indices was even worse. Click to enlarge Source: Money.net There is an old market adage: “As goes January, so goes the market.” Yet an interesting trend has played out since that Fed-inspired selloff. Most major indices traded lower in February, then moved higher and are now positive for the year. (Of course, the exception to this rule is Europe, which is grappling with a most likely insurmountable heap of problems – most of them self-inflicted). But most of the emerging and frontier markets rallied from their mid-January lows and have never looked back. In fact, despite a fierce selloff this week in the emerging markets (note: nearly 25% of EEM’s holdings are in Chinese equities, where many large institutions cut their holdings this week), both of these indices have outperformed those tracking the US and Europe. So what is driving these gains? Unfortunately, it isn’t economic growth, as few countries expect to produce higher growth rates in the current year. Instead, investors seem to be rotating back into emerging market currencies which have been heavily sold in recent months. Remember last year when the ‘smart money’ was forecasting an unprecedented dollar bull market as the Fed began to raise rates? Take a look at this chart for the PowerShares DB USD Bull ETF (NYSEARCA: UUP ) (an ETF that seeks to track the Dollar Index): Click to enlarge Source: Money.net Here’s a question for the technical traders out there: If this chart were for a stock, would you want to own it? (Hint for non-traders: No). Investors have begun to realize that the Fed has painted itself into a corner, with no conceivable way to follow up their rate-raising rhetoric with action. Consequently, emerging market currencies have been on a tear as investors move back into bonds issued by developing countries in an increasingly desperate search for yield: Click to enlarge Source: Money.net Of course, much of this growth can be attributed to ‘bottom-fishing’. This year’s winners are the same countries where investors sold off every asset class a year ago. Factors that contributed to the selloff were quite serious – Western sanctions (Russia), unprecedented corruption and scandal (Brazil), and presidential incompetence (South Africa); and the fear was compounded by a commodities bear market in reaction to waning demand from China. It is quite possible – likely, even – that emerging markets investors are in the midst of a bear market rally. There certainly are few macro fundamentals that can spark excitement – in any market. Nevertheless, as another old adage goes, “There’s always a bull market somewhere” – an old saw that has stuck with me ever since I watched the Sri Lankan stock index increase over 125% in 2009, while the rest of the world was self-immolating. With that in mind, let’s take a look at the five best – and five worst – equity market indices in the emerging and frontier market spectrum so far this year. We track all indices that are included within the MSCI country classification list for frontier and/or emerging markets. We’ll also take a look at ETFs or ADRs that are a generally accepted way for investors to get direct access via one of the US stock exchanges. As you can see, Latin America is dominating the field: The Five Best Country MSCI Classification Primary Index YTD Peru Emerging S&P/BVL Lima General Index 34.68% Brazil Emerging Ibovespa Sao Paulo Brazil 19.19% Argentina Frontier Buenos Aires SE Merval Index 14.33% Morocco Frontier Casablanca MASI All Shares Index 13.71% Colombia Emerging Colombia COLCAP Index 11.91% Source: Bloomberg Peru: Amidst an ongoing presidential election, the Lima Index went near-vertical in early April after the reigning leftist candidate failed to secure enough votes to qualify for a runoff. Best equity plays: iShares MSCI All Peru Capped ETF (NYSE: EPU ). For ADRs, Southern Copper (NYSE: SCCO ) is a US-listed copper miner that generates 43% of its revenues in Peru. Brazil: No tangible bull case here, other than it has been oversold amidst the worst recession in a century and the unprecedented Petrobras (NYSE: PBR ) scandal. A slight bump in depressed oil prices have also contributed. Look for a further rally if the Senate pushes out lame-duck president Rousseff later this month. Best equity plays: iShares MSCI Brazil Capped ETF (NYSE: EWZ ). Honestly, there’s not much to love here. Argentina: We currently receive more enquiries about Argentina than any other frontier market, except Iran. This is a definite value play – after years of financial isolation, the country just closed its first bond offering in over a decade and is about to proceed with its first IPO. As we’ve written previously , though, it pays to be cautious here. Best equity plays: Global X MSCI Argentina ETF (NYSE: ARGT ). Some interesting ADRs include integrated oil company YPF (NYSE: YPF ), Banco Macro SA (NYSE: BMA ) and Grupo Financiero Galicia (NASDAQ: GGAL ). Morocco: The tiny Casablanca Stock Exchange’s All-Shares Index has been on a tear over the past two weeks. Positive sentiment is building in the North African country after Bank of China announced it would base most of its African operations there. Best equity plays: Not easy for US investors. No Moroccan companies carry ADRs; the closest proxy is the WisdomTree Middle East Dividend ETF (NYSE: GULF ) which currently has a 13% weighting in Morocco. Its largest holding is Maroc Telecom ( OTC:MAOTF ), at 10% of total weighting. Colombia: Coming off a very bad year in 2015, underpinned by the one-two punch of high inflation and lower commodity prices. Higher prices for oil have helped to ease investors back into the Bogota Stock Exchange, while US real estate investors are beginning to discover opportunities here. Best equity plays: Global X MSCI Colombia ETF (NYSE: GXG ); ADRs include Bancolombia SA (NYSE: CIB ) and Ecopetrol SA (NYSE: EC ). And finally, let’s take a look at the worst-performing frontier and emerging markets so far this year. Remember that volatility is generally higher in emerging markets, and particularly in frontier markets. Today’s dog could be tomorrow’s darling, and vice versa: The Five (Actually Four) Worst Country MSCI Classification Primary Index YTD Ukraine Frontier Ukraine PFTS Index -8.85% Ghana Frontier Ghana SE Composite Index -9.44% Nigeria Frontier Nigerian SE All Share Index -10.75% China Emerging Shanghai SE Composite Index -17.68% China Emerging Shenzhen SE Composite Index -18.94% Source: Bloomberg Most of the names on this list are widely expected, as we show here: Ukraine: No explanation needed. Rampant inflation, non-existent economy, and did I mention a low-intensity conflict on its eastern flank? I’ve been hearing about opportunities on the ground for the truly adventurous, but that’s about it. Ghana: Weak currency, coupled with rising inflation. The Ghanaian economy has begun to show symptoms of ‘Dutch disease’ as government revenues move to support recent oil discoveries while leaving other industries to rot. Nigeria: Take the Ghana explanation mentioned above, and ramp up the intensity by 10x. The current president is resisting calls to devalue the currency, the naira. China: This is the proverbial ‘elephant in the room’ – not just for emerging markets, but globally. Stocks in the world’s second-largest economy have sold off aggressively this year amidst speculation of looming corporate bond defaults and concerns over economic growth. Continued weakness here may begin to spill over into the global economy. In conclusion, a prudent investment strategy with regard to emerging and frontier markets might include the following: Consider weighting more heavily toward EM and particularly selected FM as dollar weakness continues to push assets into these markets. Region, and even country, selection remains important. Keep an eye on Latin America – but beware the siren song of the bear market rally. Keep an eye on the data. Much of the recent gains have been driven by value investors picking up oversold assets. Without clear indicators of actual economic growth, this rally may be short-lived. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Pakistan Likely To Enter MSCI Emerging Markets Index

MSCI is considering reclassifying the Pakistani equity market from frontier to emerging market status on June 14th, 2016. MSCI – a leading provider of research-based indexes and analytics – announced that it will release on June 14, 2016, shortly after 11:00 p.m. Central European Summer Time (CEST), the results of the 2016 Annual Market Classification Review. As a reminder, three MSCI Country Indexes are currently included on the review list of the 2016 Annual Market Classification Review: MSCI China A and MSCI Pakistan Indexes for a potential reclassification to Emerging Markets and MSCI Peru Index for a potential reclassification to Frontier Markets. It is important to note that MSCI is not the only index provider that classifies markets but is considered the reference benchmark for many markets. MSCI and other index providers base their market classification on a number of quantitative measurable and comparative criteria while aiming to avoid qualitative and/or subjective criteria. PAKISTAN: ECONOMY IN FOCUS Pakistan is a country with a population of 190 million people. Pakistan’s GDP stands at USD 250 billion (Year 2015). Pakistan’s economy continued to pick up in the fiscal year 2015 as economic reform progressed and security improved. Inflation markedly declined, and the current deficit narrowed with favorable prices for oil and other commodities. Despite global headwinds, the outlook is for continued moderate growth as structural and macroeconomic reforms deepen. Selected economic indicators (%) – Pakistan 2015 2016 Forecast 2017 Forecast GDP Growth 4.2 4.5 4.8 Inflation 4.5 3.2 4.5 Current Account Balance (share of GDP) -1.0 -1.0 -1.2 Source : Asian Development Bank CPEC : THE GAME CHANGER FOR PAKISTAN China Pakistan Economic Corridor (CPEC) is a mega project of USD 46+ billion, taking the bilateral relationship between Pakistan and China to new heights. The project is the beginning of a journey of prosperity for Pakistan and China’s Xinjiang. The economic corridor is about 3,000 kilometers long consisting of highways, railways and pipelines that will connect China’s Xinjiang province to the rest of the world through Pakistan’s Gwador port. The investment on the corridor will transform Pakistan into a regional economic hub. The corridor will be a confidence booster for investors and attract investment not only from China but other parts of the world as well. Other than transportation infrastructure, the economic corridor will provide Pakistan with the telecommunications and energy infrastructure. MSCI INDICES AND PAKISTAN – A QUICK RECAP It is important to mention that between 1994-2008, Pakistan was part of the MSCI Emerging Markets Index. After the Balance of Payment crisis in 2008, KSE was shut down for 4 months after which the country was kicked out of the Emerging Markets Index. In May 2009, Pakistan was added back in the MSCI Index, but this time it was added in the Frontier Markets Index. In June last year, MSCI put Pakistan up for official review regarding inclusion into the Emerging Markets Index. Now, as per today’s press release, MSCI will make its decision whether to upgrade or not on 14th of June. RECAP: THE MSCI PAKISTAN INDEX Click to enlarge Click to enlarge Click to enlarge Click Here for MSCI Fact Sheet INDEX METHODOLOGY The index is based on the MSCI Global Investable Indexes (GIMI) Methodology – a comprehensive and consistent approach to index construction that allows for meaningful global views and cross regional comparisons across all market capitalization size, sector and style segments and combinations. This methodology aims to provide exhaustive coverage of the relevant investment opportunity set with a strong emphasis on index liquidity, investability and replicability. The index is reviewed quarterly – in February, May, August and November – with the objective of reflecting change in the underlying equity markets in a timely manner while limiting undue index turnover. During the May and November semi-annual index reviews, the index is rebalanced and the large and mid capitalization cutoff points are recalculated. SOME IMPORTANT NUMBERS/STATS Click to enlarge WHAT TO LOOK FOR IF PAKISTAN ENTERS MSCI EMERGING MARKETS INDEX? If the decision is positive, emerging markets funds with 40-50 times the capital of frontier funds will be forced to have a look at Pakistan. In our view, this is an opportunity with a risk-reward skewed heavily towards the positive side. PSX – Pakistan Stock Exchange – currently trades at 9.0x earnings; companies have grown faster than their regional peers in USD over the last ten years. Should Pakistan enter MSCI Emerging Markets, it does so at more than 40% P/E discounts to its Asian EM peers. We don’t believe this is sustainable, hence calls for a positive re-rating of the valuations. ETFs IN FOCUS: Several ETFs and mutual funds invest in emerging markets; on the other hand, a small number of ETFs focus on frontier markets. For comparison purpose, we are taking BlackRock Capital ETFs. BlackRock Capital offers the iShares MSCI Emerging Markets ETF (NYSEARCA: EEM ), asset base of which is approx USD 25 billion when compared to BlackRock Capital’s iShares MSCI Frontier 100 Index ETF (NYSEARCA: FM ), asset base of which is merely USD 420 million. It is important to note that the fund size of most of the frontier markets ETFs are very small when compared with emerging markets ETFs. Hence, we don’t see any major selling pressure from the liquidation of frontier market funds which are invested in Pakistan, as that selling will be absorbed easily by the emerging market funds. In fact, emerging markets funds will bring in more liquidity in the market, hence, providing frontier market funds an easy exit. OUR STANCE We are of the view that it is likely that Pakistan will be given a green signal for entering MSCI Emerging Markets on June 14th, 2016. We caution against the notion that reclassification is a panacea for market ills or underperformance. Typically, reclassification (both upgrades and downgrades) have followed or been accompanied by economic and financial policy reforms, including improvements in market infrastructure. It is these more fundamental and structural reforms that attract and retain international investors and boost the confidence of domestic investors. Reclassifications are best viewed as signaling a confirmation of policy reforms and changes in market conditions. Hence, an identification problem may arise whereby improved market conditions are attributed to market reclassification decisions, whereas they are due to policy actions and reforms which lead to a reclassification. Similarly, we note that reclassification may have perverse effects if there is an ‘overshooting’ effect whereby speculation leads to higher prices in advance of a reclassification, over and above what would be justified by market/ economic fundamentals. Prices then adjust on the actual reclassification event. As highlighted in the article, Average Annual Revenue and Net Profit Growth of companies listed in Pakistan have been phenomenal between 2005-2015. Moving forward with CPEC in place, Pakistan’s inclusion in the MSCI Emerging Markets Index will be beneficial for both local as well as global investors. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Star Gas’ (SGU) CEO Steven Goldman on Q2 2016 Results – Earnings Call Transcript

Star Gas Partners LP. (NYSE: SGU ) Q2 2016 Earnings Conference Call May 05, 2016 11:00 AM ET Executives Chris Witty – Darrow Associates, IR Steven J. Goldman – President and CEO Richard F. Ambury – CFO, EVP, Treasurer Analysts Andrew Elie Gadlin – Odeon Capital Group George Schultze – Schultze Asset Management Operator Hello, and welcome to the Star Gas Partners Fiscal Second Quarter Results Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Steven J. Goldman, Star Gas Partners Chief Executive Officer. Please go ahead. Steven J. Goldman Thank you. Good morning, and thank you for joining us today. With me today is Star Gas’ Chief Financial Officer, Rich Ambury. After some brief remarks Rich will review the fiscal second quarter ended March 31, 2016. And we will then take your questions. But before we begin, Chris Witty of our Investor Relations firm, Darrow Associates, will read out the Safe Harbor Statement. Please go ahead, Chris. Chris Witty Thanks, Steve, and good morning. This conference call may include forward-looking statements that represent the Partnership’s expectations and beliefs concerning future events that involve risks and uncertainties that may cause the Partnership’s actual performance to be materially different from the performance indicated or implied by such statements. All statements other than statements of historical facts included in this conference call are forward-looking statements. Although the Partnership believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Partnership’s expectations are disclosed in this conference call and in the Partnership’s quarterly reports and annual report on Form 10-K for the fiscal year ended September 30, 2015. All subsequent written and oral forward-looking statements attributable to the Partnership, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. Unless otherwise required by law, the Partnership undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this conference call. I’d now like to turn the call back over to Steve Goldman. Steve. Steven J. Goldman Thanks, Chris. First and foremost, I’d like to begin by mentioning how challenging this quarter was due to the extraordinarily warm weather. Last year we had the opportunity to show how well we can perform during very cold weather. Our organization then shined, and we posted record results. But every year, as you know, stands on its own. It should come as no surprise that at the start of each year, our greatest concern is that winter will not provide us the normal cold temperatures we expect and need to perform well. This year, given the circumstances, we needed to demonstrate strong control and the ability to perpetually adjust our plans, as each period of expected cold weather failed to materialize. Because there is always the possibility that temperatures can be rather abnormal, either way, we always plan to service our customer in the coldest as well as the warmest of environments. This past quarter was a period of intense focus and careful decision making designed to achieve the best customer satisfaction and operating results possible. And we really could not be prouder of how well our entire team managed through such challenging conditions. Star Gas continues to push forward to better itself as an organization. We used the past six months to sharpen elements of our strategy to attract and retain a broader customer base through our expanded footprint. We believe that the unusual weather and low oil price also indirectly impacted other aspects of our business. So lack of severely cold weather gave customers less of a reason to leave their current provider and seek higher levels of service we’re known for. And the lower cost of oil gave rise to many extra low price teaser offers in the marketplace, as many competitors became extremely aggressive to try to lure new customers. Under these circumstances, we retained our margin discipline, but attrition did suffer. That said, we continued to work on creating stronger, longer lasting relationships with our customers to help minimize results like this in the future. We are also redoubling our territory expansion efforts, both by organically growing our base, as well as pursuing attractive acquisitions. In addition, we continue to emphasize efforts to broaden the service related area of our business. We see the growth of such services as key to our future success in areas like plumbing, natural gas service, air conditioning, and home security. In the past, these were primarily relationship enhancements to our current fuel customers, but we now see them as revenue opportunities external to our existing account base. We are examining and testing various ways in which to ensure a more durable long-term relationship with homeowners; one that covers a broad spectrum of offerings from propane and home heating oil to these ancillary services, which at times are counter-seasonal to our main business. So while these past six months certainly caused us to adjust some plans for the remainder of this fiscal year, we will not abandon our efforts to enhance our customers’ experience and strengthen Star Gas’ overall performance. The warm weather, which had a negative impact on volume and revenue, drove home the importance of our plans to expand Star’s geographic footprint and the range of service offerings. We are more determined than ever to position our organization for better results going forward by focusing on ways to grow the customers we serve and the ways we serve them. Lastly, Star Gas recently announced that it raised the quarterly distribution to $0.1025 per unit. Based on our never-ending effort to strengthen the business and shareholder value, we believe this increase is part of a rational approach consistent with current and future cash flow expectations. With that, I’ll turn the call over to Rich Ambury to provide some comments on the second quarter results. Rich. Richard F. Ambury Thanks, Steve, and good morning, everyone. For the quarter, our home heating oil and propane volume decreased by 53 million gallons, or 25%, to 157 million gallons as the additional volume provided by acquisitions was more than offset by the impact of warmer weather, net customer attrition, and other factors. Temperatures in Star’s geographic areas of operations for the second quarter were 26% warmer than during the prior year and 12% warmer than normal. The warmer temperatures were a continuation of the weather patterns experienced during the first quarter of fiscal 2016. Also, as a reminder, the second quarter of fiscal 2015 was 19% colder than normal. Our product gross profit declined by $59 million, or 24%, due primarily to the decline in home heating oil and propane volume. Delivery and branch expenses decreased by $16 million, or 15%, as an acquisition-related increase of $3 million was more than offset by a reduction in the base business of nearly $19 million. In the second quarter of fiscal 2016, we recorded a non-cash credit of $14 million for our derivatives. In the prior-year’s comparable quarter, we recorded a similar credit of $13 million. Interest expense decreased $2 million, the result of refinancing $120 million of 8.875% debt with $100 million term loan that was at lower variable rates last year. We posted net income for the quarter of $55 million, or $21 million less than the prior-year period. Adjusted EBITDA decreased to $89 million, down $39.0 million, or 31%, as lower operating expenses were more than offset by the decline in volume driven by 26% warmer weather. For the first half of fiscal 2016, our home heating oil and propane volume decreased by 80 million gallons, or 25%, to 237 million gallons, again, as the additional volume provided by some acquisitions was more than offset by the impact of warmer weather, net customer attrition and other factors. Temperatures in our geographic areas of operation for the first half of fiscal 2016 were 27% warmer than last year’s comparable period and 20% warmer than normal. Our product gross profit declined by 22%, or $82 million, as higher home heating oil and propane margins were more than offset by the decline in home heating oil and propane volumes sold. The continued decline in home heating oil and propane product costs contributed to the expansion in our per-gallon margins. In delivery and branch expenses, we recorded a $12.5 million credit under our weather hedge contract. Outside of this, delivery and branch expenses rose $6 million due to acquisitions, but was reduced by $24 million in response to the warmer weather. Again, we recorded a non-cash credit of $9 million for derivatives. In the prior-year’s comparable period, we recorded a similar credit of $4 million. Interest expense decreased by $3.5 million, again, due to the result of the refinancing that I previously mentioned. We posted net income for the first half of fiscal 2016 of $67 million, or $24.0 million less than in the prior-year period. Adjusted EBITDA decreased to $125 million, down $48 million, or 28%, as the impact of higher home heating oil and propane per gallon margins and lower operating expenses, and the $12.5 million credit recorded under our weather hedge contract was more than offset by the decline in volume driven by 28% warmer weather. Now looking over at our balance sheet, at the end of the quarter, we had cash on hand of $147 million, zero borrowings under our revolving credit facility, and $97.5 million of long-term debt. While we were obviously disappointed with the warm weather, I would like to point out one interesting statistic. For the 12 months ending March 31, 2016, we generated $92.3 million in adjusted EBITDA during a period in which the winter temperatures were 20% warmer than normal. If this had been our year end, this would have been our third best year ever. And with that, I’d like to turn this over to Steve. Steven J. Goldman Thanks, Rich. At this time we’d be pleased to address any questions you may have. Operator, please open the phone lines for questions. Question-and-Answer Session Operator We will now begin the question-and-answer session. [Operator Instructions]. The first question is from Andrew Gadlin with Odeon Capital Group. Please go ahead. Andrew Elie Gadlin Hey, good morning gentlemen. Richard F. Ambury Good morning Andrew. Andrew Elie Gadlin I was wondering if you could talk about some of the acquisitions you announced in the release, that there are two small acquisitions. Richard F. Ambury Yes, those were the same acquisitions that we announced in the first quarter. One was primarily a heating oil business, and another one was in the — down on our southern area and was in the propane business. Andrew Elie Gadlin And could you talk a little bit about valuation? Richard F. Ambury We’ve always said that when we make acquisitions, we try that they’re between 3.5 to 4.5 to 5 times EBITDA. Andrew Elie Gadlin And it was in that range again? Richard F. Ambury Yes. Andrew Elie Gadlin Okay. Thank you very much, gentlemen. Richard F. Ambury Okay. Operator The next question is from Mr. George Schultze with Schultze Asset Management. Please go ahead. George Schultze Hello, gentlemen. How are you? Richard F. Ambury Good George, how are you? George Schultze Good. Thanks for taking my call. I was curious, just looking at your financials and your run rate, LTM run rate of revenues and EBITDA. And I was looking at the June and September quarters of your performance last year. Richard F. Ambury Right. George Schultze For June of 2015 and September. And as you know, those two quarters you had somewhat negative EBITDA. I guess it’s a pretty seasonal business. Do you expect a similar trend this year, or would you expect with the acquisition that you swallowed last year, towards the end of the year to have less negative EBITDA going forward during the off months? Richard F. Ambury Well, we’re not going to project what we anticipate for the next six months. But we are primarily currently a heating oil company. And we generate the majority of our EBITDA, and more than our annual EBITDA in the first six months. And the last six months have always been loss EBITDA, adjusted EBITDA for us. To a certain extent, if we make a heating oil acquisition and we grow the business, the summer losses actually could uptick a little bit as well. George Schultze So you would expect as the business gets larger, that you’ll have even more negative loss or negative EBITDA. Richard F. Ambury That’s — we’re not projecting that, but that’s something you could probably expect, yeah. George Schultze Okay. And in terms of guidance going forward, I know that you generally don’t provide that. I’m not sure why because most companies do these days. But through the end of this year, since we’re already near — it’s just a couple months now to finish the September year — would you expect a similar drop off versus what you’ve had versus last year so far? Or does some of that hedging contract that you had in place, do you expect that some of that will help offset the drop off that we’ve seen due to weather? Richard F. Ambury Well, during the six months, we recorded a $12.5 million credit under our weather hedge contract. We did receive the cash for that. And we don’t have any weather hedge for April through September. George Schultze Okay. So I guess the follow-up question to that then is there anything that can be done at the business to reduce costs even further during these off quarters, in light of how you’re running versus how you were running last year? Steven J. Goldman Well, first let’s start with the last year was an extraordinary unusually unexpected high profit based on the very cold weather, which is certainly not normal, and a declining oil price market, which is relatively not usual as well. So comparing to last year, our normal trends aren’t going to ever follow that unless we have successively very cold years in a row. We always look to counterbalance decreased profitability in the early part of the year, if we’re off where we expect to be internally, with looking at other additional expense cuts or other changes that could help offset that. We are certainly looking at those. How well will they translate into reductions in expense? Depends on a lot of circumstances. There is a weather component of the summer as well that we’re yet to understand how that will unfold. We do a lot of air conditioning service and installation work, and a very hot summer could be opportune for us, and could drive some expense, but some additional net profit. Or if it’s a milder summer, we may be cutting more expense and have less profit than we would hope to have during that period. But we will be working on controlling and reducing expense, certainly, to the foundation of your question. George Schultze Okay. Question about net customer attrition. How were those trends falling this quarter? I didn’t see them in the release from yesterday. Steven J. Goldman They are trending worse than last year for the same period. George Schultze What were the percentage changes? Richard F. Ambury Well, we lost 1.2% of the business this year in the second fiscal quarter. And in the second fiscal quarter of 2016, we lost a net 0.5%. George Schultze Okay. All right, thanks. And I just have one last question. Thanks for taking my questions. It looks like on the balance sheet you have almost $150 million of cash now, if I’m reading it correctly. What can be done with that cash to make it more productive for the benefit of shareholders? Steven J. Goldman We are — one thing that we are working on as always, we are in discussions with several acquisitions. And we are hoping at least some of them in the coming months we’ll be able to execute on. And that — to us, that’s one of the best uses of that cash, as we always say. Because not only do we try to buy stuff that’s accretive to the business that’ll give return, but it also strengthens the durability of the business for the long-term investor. We are also looking at some other smaller things that we can do. Rich. Richard F. Ambury And when you look at the cash we have about 37%, 38% of our customers are in a budget payment plan. And to a certain extent they really — they paid a little bit more into that plan this year because of the 20% warmer weather. In addition to that, we had significantly declining cost of product. And if cost of product went back from let’s say $1.20 to $3.25, there would be a significant need for the equity cash that we would have to supply for the increase in our receivables. So we’re enjoying — to a certain extent, we’re enjoying a benefit of abnormally low receivables due to one, warm weather; two, customer credit balances; and three, low prices. George Schultze Okay. Is the stockholder or the stock repurchase plan, is there any active stock repurchase plan, or has that expired or been fully expensed? Richard F. Ambury It’s still active. George Schultze I’m sorry. You said it’s still active. I forget what the size of it, if you could just clarify, and then I’ll be out of the queue. Thanks again for all the questions here. Richard F. Ambury Sure. The balance is — let me just look it up for you. We got about 2.2 million of share, or units, rather, that we can still repurchase. George Schultze Okay. Thank you. Steven J. Goldman You’re welcome. Operator [Operator Instructions]. There are no more questions. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Goldman for any closing remarks. Steven J. Goldman Thank you. Again, thank you for taking the time joining us today and for your ongoing interest in Star Gas. We look forward to sharing our third-quarter 2016 results with you in August. Operator The conference has now concluded with this. Thank you for attending today’s presentation. You may now disconnect. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) 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