By Subhasree Nag
Lithium is one of those metals that are required in making lightweight, power-dense batteries that the next generation is looking up to in making electric vehicles, or EVs. However, every emerging technology face hurdles and disruptions, and lithium is no exception.
Because of the race going on in the EV industry to participate in the market with EV adoption headwinds, lithium companies are getting excess supply and, thus, weak sales. With so much going on at present, there is no guarantee that the future is going to bring in results like the past.
If the environment works in favor of the lithium stocks, the companies which are currently dealing with loss, can bounce back. Here are some of the best lithium stocks available in the market now. These stocks have been through a volatile market over the last few years but are still going steady and are some of the leading investing options.
What Are Lithium Stocks?
Lithium stocks are mostly commodity stocks that have interests in mining, refining as well as distribution of lithium. The companies that are registered under lithium stocks may be involved in producing other minerals or metals. However, lithium will always be included in their portfolio.
Lithium is one of those metals which is valued immensely for its contribution to making EV batteries. It helps in the creation of lightweight and powerful batteries, which allows EVs a long motion duration before they need to charge again.
Because the EV companies took off suddenly, lithium saw a boom in their price. This is why various lithium stocks became extremely valuable over a very short period. However, the price has dropped significantly, meaning the lithium stock prices have found more reasonable valuations.
If electric vehicles stay in demand, the lithium stock prices, along with the stock prices of those companies that mine, refine, and distribute, have a fair chance to go up again.
How To Invest in Lithium Stocks
Investing in lithium stocks is exactly like investing in any other stocks. Before investing, you have to conduct proper research to know which stocks you want to invest in. Know about the tips and tricks to buy stocks. There are various free as well as paid tools that can help you with the selection of stocks.
Once you have selected the stock that you want to buy, ensure you have a brokerage account and also put funds in your account. You can purchase any lithium stock with that. However, every individual investor has their own specific goals and needs. You can always seek help from a financial advisor to get some advice.
Best lithium stocks
Of you are thinking about which the best lithium stocks are to buy, then there are a few lithium stocks that are best for investing right now. There are different types of stocks to invest in this category. Let’s check those out and find out why those are the best in the market right now, and their pros and cons to have a clear picture.
Albemarle
Albemarle is one of the specialty chemical producers that is known to serve a big part of end markets, including consumer electronics, energy storage, and petroleum refining. They are also one of the largest producers of Lithium in the world. And this metal generates most of the company’s profits.
They produce lithium in their salt brine properties in the United States and Chile. They are also planning to open a mine joint venture in Australia. By the 4th quarter of 2023, they were down 10.10% in their revenue growth and their net income growth went down to 154.54% as compared to the previous year.
Pros
- It has top-tier properties that fall under the lowest-cost global lithium sources.
- It produces low-cost bromine in the Dead Sea and Arkansas.
- Pays almost 0.4% dividend.
Cons
- Their plans to increase their production capacity might expose them to any kind of weakness in lithium price.
- Demand for bromine is at risk because consumers are shifting from computers to tablets to smartphones.
- The Chilean government has plans to nationalize lithium, and that can create risk.
Sociedad Quimica y Minera de Chile (SQM)
Sociedad Quimica y Minera de Chile is a low-cost nitrate, iodine, and lithium producer. The key assets of the company are its caliche and lithium properties. It has lithium deposits in Chile, which is home to the highest concentration of lithium in the world, and benefits from the high evaporation rates.
They took advantage when the lithium price went up in 2022 and had a revenue growth of more than 274% for the entire year. Moreover, by 2025, they plan to invest $1.4 billion and increase their lithium capacity by 210,000 metric tons.
Pros
- Their low-cost capacity expansion creates long-term value.
- It yields an impressive 10.10% dividend.
- Attractive earnings multiple of 7.
Cons
- Production capacity expansion investment causes the risk of reducing lithium prices.
- Costs are somehow associated with the lithium hydroxide joint venture, which is in Australia, even though it is not proven.
- There are also risks with the nationalization of lithium assets that the Chilean government is planning.
Lithium Americas Corp. (LAC)
Lithium Americas is growing three different lithium properties: the Thacker Pass clay in Nevada, Pastos Grandes Basin, and the Cauchari-Olarioz in Argentina. Even though they were not producing lithium initially, by the second half of 2023, they had started production of their first project.
They have two different businesses. Lithium Americans are listed in the U.S. and have Nevada assets, whereas Lithium Argentina has all the Argentina assets. GM made an investment of $650 million in January 2023 in Lithium Americas to fund the development of Thacker Pass, and production will likely begin in 2026.
Pros
- They are the owner of high-quality as well as low-cost assets both in the U.S. and Argentina.
- GM has invested a large amount in its development, which adds credibility to its story.
- Splitting Argentine and U.S. assets will simplify the investment and reduce a lot of the geopolitical risk as well.
Cons
- There are risks involved with activist opposition to the development of Thacker Pass.
- The beginning of Thacker Pass production is still about three years away.
- Argentine assets have risks of royalties and higher taxes that can take away from the profits.
EnerSys (ENS)
This is the world’s largest industrial battery manufacturer. The specialty batteries supply some premium segments of passenger vehicle and truck markets. The company is going to invest in some higher-value products and has included lithium-ion battery technology.
Their iON batteries are designed to use lithium-ion technology for applications in the heavy-duty industry. They have reported net sales of $920 million, which is a record in the third quarter of 2023 and is an increase of 9% from the previous year. Moreover, the company also reported adjusted operating earnings of $85 million, which is also a record and is 41% more than the last few years.
This is not just a pure-play lithium stock. However, the company is profitable and has positioned itself well to benefit from the potential boom in storage solutions and lithium-ion batteries in the coming decade.
Pros
- It has a diversified business model which limits its volatility associated with the price of lithium.
- The company has a market cap of $4 billion, making it a buyout target.
- It pays a 0.2% dividend.
Cons
- Over the last three years, they have had negative earnings as per share growth.
- They have a long-term debt of $1.1 billion.
- They have limited analyst and media coverage.
Recap for lithium stocks
Since late 2022, the price of lithium has pulled back from the high. However, experts believe that this transition in the global auto industry from ICE to EV will be a huge, long-term driver of the demand for lithium.
Gene Munster, managing partner of Deepwater Asset Management, says, “When discussing electrification, EV makers have been top of mind for investors given the industry’s 35% annual growth forecast over the next 10 years.” It adds to the chemistry of batteries, and that is not going to change.
Read Also:
