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It's a big noisy universe of stocks out there. Welcome to Good Buy or Good Buy. Our goal to help cut through that noise, to navigate the best moves for your portfolio. Today, we're taking a look at cyclical stocks, and I'm here with Jeter Capital Management CEO and President Dan Jeter. Dan, come on down here. Let's talk about your buy, first of all, and that is Chevron, which is has been an interesting case, like a lot of big oil stocks, hasn't really done a heck of a lot over the past year. It's up about 2%. So let's break down why you like it here. First of all, you say there is an inflection point in the free cash flow. What is driving that?

Well, what you're really saying is that they're they're in a situation now to where finally their big project that they had in Kurdistan is coming online. And so that was nothing but a liability. Now, it's going to be something that that's going to start production. It's going to be significant contribution to free cash flow. And so it really helps them because it was a big unknown as to when that was going to come online. And so it kind of is back to, you know, they have a good international push, they have a tailwind internationally. And then obviously, they're going to have a drill, baby, drill, you know, tailwind that they're going to have domestically.

Well, is that a tailwind or a headwind? I mean, because if they you drill too much, then you're you end up getting a little bit of

have some adverse effect on the commodity. But I think we have to realize that that's going to take a long period of time. I mean, even the leases are allocated, the permitting process is obviously been a delay. Even if they basically put that in place, I mean, these rigs and various infrastructure doesn't come up overnight. They're also going to have some labor shortages right now and getting people to man the rigs. So all of some additional supplies, it's going to be basically, there's going to be a tail to that coming onboard.

Um let's talk about something that's been a big overhang, right? Which has been trying to close the deal with Hess.

With Hess.

Is it happening?

It's we think it's going to happen this summer. And it's been a huge overhang. It's a big liability. They have huge capital commitments to it. And and the fact is the biggest thing for the stock is not an immediate increase to cash flow like you're going to have from Kurdistan, but what the big deal is going to be that it fills their pipeline literally in in in the future, because they're really worried if the market's worried about their properties that they have going into the future. Are you going to have these new reserves? Are you going to have this new inventory? Where is it going to come from? And needless to say, that's a massive, massive field and it is used to them to finally put that deal through and try to put some into production.

And then there's another area where we just got announcement of a deal recently that has to do with putting natural gas power into data centers, which, as we know, has been a huge area.

Well, that's going to be huge because it's a whole AI play. So there's very few situations where literally a raw commodity energy company, utilities company is one thing, but a raw commodity energy company, an EMP company is going to have a chance to participate in this. So now they switch over the natural gas, plugs them right into that. This is going to be major power source utilization, and they're trying to literally have a direct pipeline into it and be one of the first to the show.

Right. And they're partnering with GE Vernova to to do that. Let's talk about some risks, though, on the flip side. You could potentially, of course, they're still commodity dependent, right? Even though they are relatively diversified, what's the risk that we could see a pullback in oil prices, for example?

Exactly.

Well, look, if more if if more supply comes on sooner, or you have a reduction in demand because the economy, whether it's caused by tariffs or whatever happens to be, the economy slows, then anything that's going to affect that demand and commodity price, you know, unfortunately, they're a direct participant to that. Right. You know, and you know, and the other risk that they really have, that's just the big overhang as you referred to earlier, is if the Hess deal doesn't go through, Yeah. you know.

Well, they need the Exxon buy-in for the Hess deal to go through because of all of the parties interest in the Guyana properties and and offshore oil fields there. So Yeah. that's a good question.

Correct.

No. It's huge. It's a big overhang as I mentioned for the pipeline. It's an overhang with regards to, you know, liability dissipation, and it's a it's a big overhang. So getting it done this summer, we think that, you know, the stock is a reasonably priced where it is. It's been under pressure. So you get a little pop, and if they get some domestic additional production and moving into the data center type of the business, you know, they have a good future ahead of them, we feel, at this price point.

Okay. Well, so let's talk to the stock that you don't like as much, and that is Starbucks. And this is a stock that's up about 20% over the past year. Brian Nickel came over from Chipotle to run Starbucks, so there's been a lot of enthusiasm there. But you're looking at potential margin pressures here. What what's behind those?

Well, what's happened is he's come over, he's a great operator from Chipotle. He knows what he's doing. He's put together a lot of initiatives and something that's been a little bit of a dead brand. He's moving it forward, but hey, that that comes at a cost. And so what you're seeing is there's some margin erosion that's taking place. So he's going to have, and that's not unusual, but you're going to have to see that he can deliver, and that basically that can go forward, he can push it and then you know, you're going to have to see a strong increase in what you're going to see in in earnings per share based upon where the current PE is. And there's no way around that. You know, he's going to have to deliver and showing that that has an increase in margins, and the biggest thing is increase in same-store sales.

And let's also talk about the operating environment. By this you mean in part, what's going on in Washington, the new HHS secretary coming in, RFK Jr., who is not a big fan of big sugar.

Of sugar. Yeah.

No. And look, they've been they've been referred to as sugar, you know, sugar on ice. And so the fact of matter is they may get some pressure. And you never know where that's going to go, you know. They've been boycotted before. If that picks up momentum and people jump on that, and they start boycotting those products, those are high margin products. You know, they're they're way, way away from just being in the coffee business. So that has to continue to flow and has to continue to expand, and if they get a lot of pressure on that, it's going to be a roadblock.

And then there's where the stock is trading, which is above its historical trading range with that sort of breakout that we have seen. So do you think it's expensive then, given some

It's definitely expensive. Yeah. It's at a 35 PE, you know, based on what we're looking for in 25. You know, it's it's it's relatively high on a relative basis for itself, just because as you mentioned earlier, the stock's had a big pop. You know, and it jumped. And so so now it's it's trading basically on good news. I wouldn't say it's trading to perfection, but it's trading amongst, you know, a lot of happiness. Maybe it's just sugar high. But they uh but now they need to produce and make it go forward.

So let's talk about what could get you back in, just briefly here. If the valuation comes down, makes sense there, or you get some other types of of operational or turnaround in the business.

Right.

Well, valuation has to come down, we think, for us to move in and on a heavier position, the valuation has to come down. And you have to have some margin predictability, because you don't know, is the current run rate of what they're doing with expenditure is going to be enough to do it? Or does look, if he has to, he's going to double down, you know, to drive the top line. Same-store sales in this business is everything. So they have to be able to push it, and you're going to have margin erosion, or you want to see some predictability.

Got you. Okay. Well, thanks so much for being here. And just quickly, positions in either of these names?

Uh we own Chevron. Uh I own it, the company owns it, my family owns it, I think my dog owns it. Yeah. And Starbucks, we haven't in one fund that the company owns. I don't own it.

Okay, Dan. Thanks so much for being here. And thank you so much for watching Good Buy or Good Buy. We'll bring you new episodes at 3:30 p.m. Eastern.