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Best And Worst Q2’16: Healthcare ETFs, Mutual Funds And Key Holdings

The Health Care sector ranks seventh out of the ten sectors as detailed in our Q2’16 Sector Ratings for ETFs and Mutual Funds report. Last quarter , the Health Care sector ranked sixth. It gets our Dangerous rating, which is based on aggregation of ratings of 22 ETFs and 80 mutual funds in the Health Care sector. See a recap of our Q1’16 Sector Ratings here . Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Health Care sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 23 to 351). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Health Care sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 Click to enlarge * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 Click to enlarge * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Saratoga Advantage Health & Biotechnology Portfolio (SBHIX, SHPCX) and Live Oak Health Sciences Fund (MUTF: LOGSX ) are excluded from Figure 2 because their total net assets are below $100 million and do not meet our liquidity minimums. iShares Global Healthcare ETF (NYSEARCA: IXJ ) is the top-rated Health Care ETF and Schwab Health Care Fund (MUTF: SWHFX ) is the top-rated Health Care mutual fund. IXJ earns an Attractive rating and SWHFX earns a Neutral rating. BioShares Biotechnology Products Fund (NASDAQ: BBP ) is the worst rated Health Care ETF and Alger Health Sciences Fund (MUTF: AHSAX ) is the worst rated Health Care mutual fund. Both earn a Very Dangerous rating. 354 stocks of the 3000+ we cover are classified as Health Care stocks. Gilead Sciences (NASDAQ: GILD ) is one of our favorite stocks held by IXJ and earns a Very Attractive rating. Gilead has built a highly profitable business in the biotech industry and has grown after-tax profit ( NOPAT ) by an impressive 39% compounded annually since 2005. Over the same time frame, Gilead has increased its return on invested capital ( ROIC ) from an already high 37% in 2005 to a top-quintile 88% in 2015. Over the past five years, Gilead has generated a cumulative $26 billion in free cash flow. Despite the operational successes, GILD remains undervalued. At its current price of $98/share, GILD has a price-to-economic book value ( PEBV ) ratio of 0.6. This ratio means that the market expects Gilead’s NOPAT to permanently decline by 40%. However, if Gilead can grow NOPAT by just 4% compounded annually for the next five years , the stock is worth $181/share today – an 85% upside. Eli Lilly (NYSE: LLY ) is one of our least favorite stocks held by AHSAX and earns a Dangerous rating. Over the past five years, Eli Lilly’s NOPAT has declined by 12% compounded annually. The company’s ROIC has fallen from 21% in 2010 to only 8% in 2015. NOPAT margins have followed a similar path and fallen from 24% in 2010 to 14% in 2015. In the meantime, LLY has increased 25% over the past two years, which has left shares overvalued. To justify its current price of $75/share, Eli Lilly must grow NOPAT by 8% compounded annually for the next 14 years . This expectation seems awfully optimistic given the deterioration of LLY’s business operations. Figures 3 and 4 show the rating landscape of all Health Care ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs Click to enlarge Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds Click to enlarge Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme. 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.

Investing In A Stock Split ETF: 2 Is Better Than 1

How can you make money even in a market that’s gone sideways for most of the year, especially the last few months? One answer: invest in a cutting edge ETF that’s designed to stay “ahead” of the market, including one that’s been outperforming the market by a healthy margin this year. The USCF Stock Split Index Fund (NYSEARCA: TOFR ), pronounced “Two Fer”, is the very first ETF investing exclusively in stocks that split. On April 19, Barron’s and Lipper reported TOFR was up 5.62% year to date or more than five times higher than the rise of its category (1.06%) this year and 2.28 times more than the S&P 500’s 2.47% increase. And on May 6, investors who had invested in TOFR at the beginning of the year would have seen returns that were about four times better (4.03 times to be exact) than if they had invested the same money in the S&P 500; TOFR was up 4.31% vs.1.07% for the S&P 500, according to Barron’s and Lipper. It also was running almost five times better than its category, which was up just .88% this year. TOFR is currently in the #1 quintile rank YTD and in the top 2% in its category, according to Lipper . How does TOFR compare with other ETFs? While the fund has slightly lagged the Vanguard Dividend Appreciation ETF (NYSEARCA: VIG ), which was recently up 4.76% this year, it’s been beating the SPDR S&P 500 ETF Trust (NYSEARCA: SPY ) YTD by a healthy, four to one margin (4.31% vs roughly 1.00%). Since the fund’s inception in September 2014, its numbers do not look quite as impressive. TOFR had one really bad quarter (the fourth quarter of 2015), during which much of its previous performance was given back. TOFR’s 1.02% move higher trailed the S&P’s 7.04% gain by about 6 percentage points in that three month period. But since then, it’s bounced back well. In fact, if you take the cumulative return since TOFR’s inception, it’s up 10.89% vs. the S&P’s 7.66%. Like most investments, TOFR may underperform at times. However, over the long haul, the 20 year track record of the newsletter it’s based on is what makes TOFR compelling: it was recently up 719% vs. 185% for the Dow and 191% for the S&P 500 — a difference of nearly 4-1 over both the Dow and S&P 500 (3.89-1 to be exact for the Dow and 3.76-1 for the S&P 500). TOFR is part of USCF (United States Commodity Funds LLC) Investments, which manages nine EF funds with total recent assets of approximately $5 billion. (Its ETFs include the first commodity ETF based on crude oil launched in the U.S., which is the fourth commodity ETF of any kind launched in the U.S. USCF also manages the first natural gas based ETF, which is the most actively traded natural gas commodity ETF in the U.S.) TOFR’s concept is simple. It’s like someone asking: would you rather have one big scoop of ice cream or two smaller ones? Well, most people would feel that two scoops are better than one, especially if those two scoops somehow had the potential to grow even bigger and at a faster rate than the big one. It turns out that, according to TOFR principal and portfolio manager Andy Ngim, two shares are usually better than one. In fact, analysis shows that stocks usually tend to do well for 24-36 months after a company announces a split, so TOFR holds them for 30 months, which is smack dab in the middle of the 24-36 month period. An influential academic research study by David Ikenberry at Rice University, discussed in the April 22, 1996, issue of Forbes, reported that there is a measurable difference in a stock’s performance for up to three years after it splits 2 for 1 as opposed to those stocks that have not split. TOFR consists of 30 stocks that are equally weighted. “Each holding accounts for 3.33% of our portfolio,” says Ngim. The bottom line: no matter how big the stock is — Apple (NASDAQ: AAPL ) is included in TOFR and so is Nike (NYSE: NKE ), which split in December 2015 — the starting weighting is the same. “It’s a well-diversified group, covering small, mid-cap, and large-cap stocks,” adds Ngim. “There’s a value edge to the stocks comprising TOFR. A lot them pay dividends, so it builds in defensiveness.” A new stock is usually added every month to TOFR’s portfolio, which tracks newsletter publisher Neil MacNeale’s 2 For 1 Index. The popular newsletter has been published since August 1996. But what if there aren’t enough great two-for-one stock split candidates for MacNeale to consider? Since TOFR was launched, that’s only happened twice, including last month. I asked Ngim what happened during those times. “We follow Neil’s listings, so that’s what we did,” he explains. “During those two months, there were no changes to the portfolio, other than rebalancing all the holdings back to equal weight.” What about the future of stock splits? Does continued investing in them look rosey? “Like any investment, you’re going to get a surprise once in a while,” tells Ngim. “But many any of those surprises have been to the upside. And an upward trend has been continuing since 1996.” According to Ngim, the two-for-one remains the most common type of split, though some firms have been trying unconventional splits. “For example, Google recently did a nontraditional style split,” he says. “Newer companies seem to be more open in exploring nonconventional kinds of splits.” (In April 2014, when Google split its stock two for one, it also split into two companies, Google and its new parent, Alphabet. If Google had done a typical split, the would have doubled the voting power of their A shares (NASDAQ: GOOGL ) relative to their B shares, which would have diluted the founders’ voting power. The founders, such as Larry Page and Sergey Brin, and insiders, like executive chairman Eric Schmidt, who owned most of the Class B stock, didn’t want that, so they issued a new Class C (NASDAQ: GOOG ), whose shares do not have voting power.) Other firms have been waiting longer and longer to announce their splits. And some stocks never split, no matter how pricey they become. “For example, Berkshire Hathaway (NYSE: BRK.A ) hasn’t split,” says Ngim. The stock recently closed at a whopping $215,880 per share. 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.

Xcel Energy (XEL) Benjamin G. S. Fowke on Q1 2016 Results – Earnings Call Transcript

Xcel Energy, Inc. (NYSE: XEL ) Q1 2016 Earnings Call May 09, 2016 10:00 am ET Executives Paul A. Johnson – Vice President-Investor Relations Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Robert C. Frenzel – Chief Financial Office & Executive Vice President Analysts Ali Agha – SunTrust Robinson Humphrey, Inc. Julien Dumoulin-Smith – UBS Securities LLC Travis Miller – Morningstar, Inc. (Research) Operator Good day, everyone, and welcome to the Xcel Energy First Quarter 2016 Earnings Conference Call. Today’s call is being recorded. At this time, I would like to turn the conference over to Paul Johnson, Vice President of Investor Relations. Please go ahead, sir. Paul A. Johnson – Vice President-Investor Relations Good morning, and welcome to Xcel Energy’s 2016 first quarter earnings release conference call. Joining me today are Ben Fowke, Chairman, President and Chief Executive Officer; and Bob Frenzel, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team in the room to answer your questions. This morning, we will review our 2016 first quarter results and update you on recent business and regulatory developments. You may have noticed that our earnings call is a bit later than normal this quarter. We just implemented a new general ledger system, so we built a little extra time into the schedule. We’re pleased to report that everything went very well with the implementation. Today’s press release refers to both ongoing and GAAP earnings. 2015 first quarter ongoing earnings were $0.46 per share, which excludes a charge of $0.16 per share following the decision by the Minnesota Commission in the Monticello nuclear prudence review. GAAP earnings for the first quarter of 2015 were $0.30 per share. As a reminder, some of the comments during today’s conference call may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and our filings with the SEC. I’ll now turn the call over to Ben. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, thank you, Paul, and good morning. Bob will go into more detail later, but in summary, we reported ongoing earnings of $0.47 per share for the quarter, compared to $0.46 per share last year. Overall, it was a solid quarter in which declining O&M expenses offset unfavorable weather and lower than expected sales. While electric sales in the first quarter were below expectations, we expect sales to improve in the second half of the year, and we remain very confident in our ability to deliver earnings within our guidance range. As a result, we are reaffirming our 2016 ongoing earnings guidance of $2.12 to $2.27 per share. As we’ve previously discussed, we are executing on our upside capital investment plan. Later this month, we’ll make a filing with the Colorado Commission to add 600 megawatts of wind generation and associated transmission. This represents a rate base investment of just over $1 billion. In April, the Commission confirmed our interpretation of a Colorado law that allows utilities to own 25% to 50% of incremental renewables without going through a competitive bid process, if the project is developed at a reasonable cost compared to similar renewable sources available in the market. The levelized cost of this wind project including transmission is projected to be below any other existing wind PPAs in the PSCo portfolio. We therefore believe we’ll be able to demonstrate to the Commission and the independent evaluator that this project meets and exceeds the reasonable cost standard and represents tremendous value to our customers. We plan to request a Commission decision by November so that we can capture the full production tax credit benefit for our customers. This capital investment is currently reflected in our upside capital forecast (3:23). If the Commission approves this project, we will move it to our base capital forecast, which will result in rate base growth of 4.5%, a great example of organic and disciplined growth that provides value to shareholders, customers and the economy in our service territory. You should expect us to continue to find investment opportunities of this nature that will drive us to our upside capital goals. Next, I’d like to spend a few minutes recognizing the outstanding efforts of our employees in responding to a major snowstorm in Colorado. In March, Denver and Northern Colorado were hit with a blizzard with 12 to 18 inches of snow and wind gusts over 60 miles per hour that caused approximately 350,000 outages. As a result of proactive planning prior to the storm and the work of over 950 employees and contract crews, we were able to restore service to 90% of our customers within 12 hours, 98% of our customers within 36 hours, and 100% of our customers within 60 hours. This was another example of our world-class storm restoration, and I want to thank all of our employees for their dedication and tremendous efforts to provide excellent customer service and reliability to our customers. Turning to other accomplishments, we recently received several awards that are worth mentioning. In March, the EPA and others recognized Xcel Energy with a 2016 Climate Leadership Award for Excellence in Greenhouse Gas Management. The award acknowledges our commitment and progress in reducing CO2 commissions (sic) emissions. Military Times ranked Xcel Energy as one of the Top Employers of Veterans in 2016. Finally, in April, AWEA named Xcel Energy the number one wind provider of energy for the 12th consecutive year. Finally, we recently announced the hiring of Bob Frenzel as our new Executive Vice President and CFO. Bob brings more than 17 years of experience in energy, banking and consulting in addition to six years of experience as an officer in the U.S. Navy. He most recently served as Senior Vice President and CFO for Luminant. Bob brings a wealth of experience that complements our strategies and our business. He understands our industry and has a proven track record of driving excellent performance and solid growth. Some of the key attributes that Bob brings to the table include strong financial and commercial acumen, excellent strategic vision and execution, an engineering and nuclear background, and an outstanding experience managing cost. He will be a valuable addition to the Xcel Energy team. I think it’s important to recognize that our strategic plans and priorities are not changing. We will continue to focus on organically growing our regulated operations and maintaining the disciplined financial approach you’ve come to expect from us. I also want to recognize the outstanding service and contributions of Teresa Madden, who is retiring after a career spanning 36 years. Teresa played a major role in building our track record of delivering on our value proposition and she leaves a solid platform for continued strong results. We’re very grateful for her many contributions and we wish her much happiness in her retirement. So I’ll now turn the call over to Bob to provide more detail on our financial results and outlook in addition to our regulatory update. Bob? Robert C. Frenzel – Chief Financial Office & Executive Vice President Thanks, Ben, for that introduction. I’m very excited to join Xcel and I’m honored to follow in Teresa’s footsteps. I commit to continuing Xcel’s long tradition of delivering on our financial objectives and growing earnings in a low risk, transparent and predictable manner. Now, let’s get to the details of the quarter. As Ben indicated, we reported ongoing earnings of $0.47 per share for the quarter as compared to $0.46 per share last year. The most significant drivers in the quarter include the following. Improved electric margins increased earnings by $0.06 per share; this was largely due to interim rates in Minnesota and capital rider revenue for recovery of capital investment, partially offset by unfavorable weather. Higher gas margins in our gas segment increased earnings by $0.01 per share, which is primarily due to rate increases from higher rate base, partially offset by unfavorable weather. Lower O&M expenses increased earnings by $0.01 per share, which reflects cost management and some timing-related issues. Partially offsetting these positive drivers was higher depreciation expense, which reduced earnings by $0.06 per share, primarily reflecting depreciation from new capital investment. Turning to our sales results, although the economy in our region remains strong and we continue to add customers, our weather-adjusted electric sales declined by 0.3%. Further adjusting for the impact of an extra day of sales in the quarter due to leap year, our weather-adjusted electric sales actually declined by 1.4%. The decline in sales is largely driven by lower use per customer from energy efficiency, an increase in the number of multi-family units, the impact of distributed solar and the impact on consumption of lower oil and natural gas prices on some of our larger customers. As a result, we have lowered our full-year electric sales growth assumption to 0.5% from 0.5% to 1% range. We continue to expect positive sales growth for the full year in all jurisdictions, due to customer growth as well as planned expansion from some of our larger customers. In addition to lowering our sales assumptions, we’ve also taken actions to lower our full-year O&M expenses. We implemented plans early in the year to offset the impact of the rate reduction in Texas as well as unfavorable weather and lower sales growth. As a result, we now expect to limit our annual O&M expenses to 0% to 1% increase for the full year. As we continue to strive to close our ROE gap, we have been pretty active on the regulatory front. Let me provide you a quick update. There are additional details included in our earnings release. In Wisconsin, we recently filed a case seeking an electric rate increase of $17.4 million and a natural gas increase of $4.8 million. This is a limited scope case, and ROE and capital structure are not expected to be an issue. The decision is expected by December, with final rates effective in January of 2017. We also have pending rate cases in Minnesota and in Texas. Both cases are in the discovery stage, and as a result, there aren’t any material new developments. Finally, we recently filed a settlement in our New Mexico rate case, which was reached between SPS, the staff, and other parties. The black box settlement reflects a non-fuel base rate increase of $23.5 million. The settlement represents a compromise which we think is reasonable. The New Mexico Commission is expected to rule on the settlement later this year and new rates are expected to go into effect in August. As Ben mentioned, we are reaffirming our 2016 ongoing earnings guidance with no changes. However, as I previously mentioned, we have updated several of the key assumptions, including electric sales and O&M expenses as detailed in our earnings release. Also, please note that we’ve reduced our assumption for capital rider recovery to reflect the transfer of some pipeline recovery from the rider to base rates as part of our last Colorado natural gas rate case. The transfer has no material impact on earnings. In summary, it was a good quarter for the company. Continued vigilance on cost management resulted in lower O&M expenses, which offset unfavorable weather and sluggish sales to deliver solid first quarter earnings. We made significant progress to convert some of our upside capital to base capital with a planned filing to own 600 megawatts of wind in Colorado. We anticipate a Commission decision later this year. Finally, we remain on track to deliver ongoing earnings solidly within our 2016 guidance range. This concludes our prepared remarks. Operator, we’ll now take questions. Question-and-Answer Session Operator Thank you. We’ll go first to Ali Agha at SunTrust. Ali Agha – SunTrust Robinson Humphrey, Inc. Thank you, good morning. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Good morning, Ali. Robert C. Frenzel – Chief Financial Office & Executive Vice President Good morning, Ali. Ali Agha – SunTrust Robinson Humphrey, Inc. Good morning, Ben. Good morning. First question, the sluggish sales growth that you alluded to in the first quarter, anything specific – I know it’s early in the year and it’s a small quarter, but that would give you that confidence that we’re still going to end up on the positive for the year given the negative start to the first quarter? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Sure, Ali. It’s really the result of conversations our account managers have had with our large commercial and industrial accounts. So we know we’re going to be seeing more load come on in the second half of the year. Ali Agha – SunTrust Robinson Humphrey, Inc. Okay. Okay, and you highlighted the earned ROE through the LTM ending in March 31. Can you just remind us what kind of regulatory lag that would translate into? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, it’s about 90 basis points of lag. And again, as you know, our goal is to cut the lag by 50 basis points by 2018, and Ali, I think we remain on track with that. If you look at Colorado, I think we are on track. The Minnesota case here should put us on track and we will continue to work diligently at SPS to get that on track including filing of cases that take advantage of new legislation in forward test years in Minnesota – I mean in New Mexico. Ali Agha – SunTrust Robinson Humphrey, Inc. And Ben, this Colorado wind filing, are you anticipating much opposition there or I mean is it pretty much a done deal, all you need to do is show the numbers? Can you just handicap us like how we should think about this filing and the approval? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, I’d never say it’s a done deal. You need Commission approval, but Ali, in tune to the first part of your question, this project has tremendous community support and it’s going to create tremendous value for our customers in fuel savings, even if you look at the lower gas forecast. So we’re excited about it, and the community and our stakeholders are excited about it, so we’re very confident this is going to go through. Ali Agha – SunTrust Robinson Humphrey, Inc. Okay and last question, when should we start to see some of the other growth investments that you’ve highlighted for us start to show up in terms of filings and potential move into base CapEx? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, some of that will come through resource plans. I mean that’s the big part of it – filings for grid monetization opportunities that we might be out there to capture value for our customers. So I mean I think you’ll see it over the next 12 months basically. Ali Agha – SunTrust Robinson Humphrey, Inc. Okay. Thank you. Operator We’ll go next to Michael Weinstein with UBS. Julien Dumoulin-Smith – UBS Securities LLC Hey. It’s actually Julien here. Good morning. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Hi. How are you? Robert C. Frenzel – Chief Financial Office & Executive Vice President Hey, Julien. Julien Dumoulin-Smith – UBS Securities LLC Good. Thank you. Hey. I wanted to follow up – a couple quick questions here. Can you elaborate a little bit on your eligibility to participate more than 25% to 50% in Colorado? What would the requirements there be, and elaborate a little bit more on the requirements of that 25% to 50% and what that threshold would be? And then, perhaps, a separate related question would be, the latest on solar, and specifically community solar in Colorado, and any opportunity to own or rate base those assets. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Okay. Well, let’s start, Julien, with the 25% to 50% standard of the Colorado legislation. The 25% standard is just – is the reasonable cost standard that I mentioned in my prepared remarks. The 50% standard – without going through a competitive bid, you need to show economic value to the community. And I think you asked, can you do more than that? Yeah, you potentially could do more than that. But at this point, we would anticipate you’d have to go through a competitive RFP to do that. And that doesn’t mean we can’t prevail on that. But that’s the law that we were referring to. So we’re pleased with that. Now you asked about community solar gardens. At this point, we don’t have plans to buy any of those projects or provide any of those projects. It doesn’t mean we couldn’t, but – nothing would prevent us, but it’s not something we’ve been actively pursuing at this point. Robert C. Frenzel – Chief Financial Office & Executive Vice President The other point, Ali – or Julien, we will be making a resource plan filing later this spring and we will potentially include some solar in as part of that resource plan, so we’ll go forward with that too. Julien Dumoulin-Smith – UBS Securities LLC Got it. And then just following a little bit on the first quarter results themselves. Obviously, little bit further from plan on the normalized, and it’s always tough to read tea leaves, but what stood out if you were to go back and try to rehash things in terms of factors driving that negative delta? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Julien, you broke up a little bit. Were you asking what drove the negative sales outlook? Julien Dumoulin-Smith – UBS Securities LLC Yeah or was there a specific factor more than others? I know you delineated a few there, but was there one that stood out? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, I mean other than the factors that we mentioned, there’s always the art versus science of capturing weather and the impact of weather, and we did have some significant mild weather in the quarter, so I’m not sure you can ever fully scrub that out. We follow the formulaic approach, which is blessed by our commissions, but there’s always some potential for anomalies. Julien Dumoulin-Smith – UBS Securities LLC Got it. All right. Thank you. Operator We’ll go next to Travis Miller with Morningstar Financial. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Hi, Travis. Travis Miller – Morningstar, Inc. (Research) Good morning, thank you. I guess I’ll continue on this demand question line here. If you think about that flat type demand, even 0.5% demand, if that continues for not just this year, but let’s say the next two years to three years, how does that put you in position for closing that 50 basis point gap? Does that require more rate cases? Does it require you to change the types of requests you’re making, the capital investment? Can you just walk me through kind of how that picture would play out? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Well, I think it does a number of things, but we’ve been anticipating relatively flat sales in our outlook for quite some time now, Travis, so our ability to close the ROE gap assumes that we are not going to have robust sales to bail us out. So it means you have to manage your O&M carefully, and we are and we will continue to do that, and in fact I think we’re in the early days of cost management. We will make sure our resource plans reflect those kinds of sales growth opportunities, so we don’t overbuild. And of course as you know, we have decoupling mechanisms here on the electric side in Minnesota, which are helpful as well. So there’s a number of things you can do from a regulatory standpoint and from an internal management standpoint, and of course from a resource planning standpoint, and that’s the environment we anticipate being in. Travis Miller – Morningstar, Inc. (Research) Okay. And then just mix between residential and C&I, what’s approximately your margin mix, I guess, is the simplest way to put it? When commercial and industrial is 1.5%, residential is down 1.1%, how does that translate into profitability, if you get kind of where I’m going there? Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Let me try to – I ask my team if they can help me with this one. I’ll have a much higher profit margin in the residential, and then when you get to the C&I, it really depends on which customer you’re talking about and which jurisdiction. For example, the largest industrial customer is in SPS. The sales there will have the most minimal impact on margin, if anybody can help further define that for Travis a bit. Robert C. Frenzel – Chief Financial Office & Executive Vice President Yeah, I mean, Travis, if you think about it, the rate per megawatt hour for residential customer is probably going to be somewhere around that $0.11 range and large C&I customer is probably going to be more in that $0.07 range. So it’s pretty different revenue stream. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer And they pay a larger demand charge too, so variable sales tend to be more of the energy – it’s more the energy pass-through than it is the high margin that you’re getting with residential. Travis Miller – Morningstar, Inc. (Research) Yeah. Okay. Great. I appreciate the thoughts. Operator We’re standing by. With no further questions at this time, I would like to turn the conference back to Bob Frenzel for any closing or additional comments. Robert C. Frenzel – Chief Financial Office & Executive Vice President Thank you for participating in our earnings call this morning. I look forward to meeting many of you over the next few weeks at the Deutsche Bank and AGA conferences. If you have any questions in the interim, please contact Paul Johnson with any follow-ups. Benjamin G. S. Fowke – Chairman, President & Chief Executive Officer Thanks, everyone. Operator This does conclude today’s call. We do thank you for your participation. 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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