Are Lithium Stocks Worth Buying And Which Ones Are The Best?

lithium stocks

An element that is getting a lot of buzz is lithium. You’ll find it in lithium ion batteries, like the ones used to power the iPhone, iPad, and Mac laptops. That said, lithium stocks are seeing renewed interest from investors.

Now, lithium is also used to make car batteries for the electric vehicle. Nearly every major automaker has rolled out plans to further grow its electric car business. For example, Volkswagen already has a $12B plan for electric cars in China.

Lithium comes from two different types of deposits. It is mined from pegmatite and recovered from spodumene, and amblygonite, lepidolite and petalite. Deposits come from China, Canada, and the United States.

The global lithium-ion battery market is expected to reach $77.42B by 2024, at a CAGR of 11.6% throughout the forecast period (2016- 2024), according to Transparency Market Research.

With such huge demand coming from the electric car and phone markets, it’s no surprise lithium stocks are becoming popular among long term investors.

lithium stocks

Lithium Mining Stocks

FMC Corporation (NYSE: FMC) – A chemical company involved in agricultural, consumer, and industrial markets worldwide. It operates in three segments: FMC Agricultural Solutions, FMC Health and Nutrition, and FMC Lithium.

FMC Lithium offers lithium for use in batteries, polymers, pharmaceuticals, greases, lubricants, glass and ceramics, and industrial uses. In February of 2018, the firm announced that it would be offering a stake in its lithium business through an IPO.

The company has a multi-billion dollar market cap and is a member of the S&P 500. It also offers investors an annual dividend of $0.66 per share.

Albermarie Corporation (NYSE: ALB) – It develops, manufactures, and markets engineered specialty chemicals worldwide. The firm offers lithium compounds, including lithium carbonate, lithium hydroxide, lithium chloride, and lithium specialties and reagents for applications in lithium batteries.

The firm has a multi-billion dollar market cap and is a member of the S&P 500. It offers investors an annual dividend of $1.28 per share.

Sociedad Química y Minera de Chile S.A. (NYSE: SQM) – A company that produces and distributes specialty plant nutrients, industrial chemicals, iodine and derivatives, lithium and derivatives, potassium, and other products and services.

SQM is the world’s largest producer of lithium. It  produces and sells  lithium carbonate and lithium hydroxide.

The corporation has a multi-billion dollar market capitalization. The company gives investors an annual dividend of $0.86 and is regarded as being one of the best lithium mining stocks.

lithium stocks

 

How To Own The Best Lithium Stocks

The quickest and easiest way to gain access to the world’s best lithium stocks is by going the ETF route. The Global X Lithium & Battery Tech ETF (NYSE:LIT) invests in the full lithium cycle. It attempts to track the performance minus fees and expenses of the Selective Global Lithium index.

Some of its top holdings include: FMC Corp; Albemarle Corp; Quimica y Minera Chile; LG Chemcial Ltd; Panasonic Corp and Tesla. One of the benefits of the ETF is that it allows investors to gain exposure to international companies that are not traded on U.S. exchanges.

The ETF is trades on the New York Stock Exchange, making it easily accessible to investors with a stock brokerage account.

Speculative Lithium Mining Stocks

Some of most speculative lithium stocks are in the junior mining space.  Lithium junior minors are exploratory companies. They produce little to no lithium. Instead, they may own property rights or some other type of asset related to lithium.

Lithium junior miners primarily rely on financing during the exploration process. This type of dilution can negatively impact a stock price; especially if the company reaches high levels of debt.  However, if it is able find some hot property, or team up with one the major lithium producers then it could see its stock explode.

Many of these companies trade on the OTC markets and are popular among day traders. When doing your research, make sure to study the management  of these companies, and see if they have a track record of success.

What The Best Lithium Stocks Have In Common

The best lithium  stocks have a positive return on assets and return on equity. Their gross margins are in mid 30s. They are active enough for day traders and long term investors, with liquidity not being an issue.

 Bottom Line

The demand for electric vehicles will continue to rise, lithium stocks can benefit from this. Apple and Samsung use lithium-ion batteries for their phones and some other  mobile devices.

The quickest and easiest way to gain exposure is by going the ETF route. However, if you want high risk- high reward opportunities then consider looking into lithium junior mining stocks. There is real excitement behind the lithium space. Don’t be surprised to hear about some companies jumping on the bandwagon. Like in 2017, when firms were changing their name to ride the bitcoin wave.

As always, do your own due diligence and don’t fall for the hype.

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