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

lithium stocks

lithium stocks Lithium stocks are getting a lot of buzz among investors. It’s a key element in rechargeable batteries, like the ones used to power the iPhone, iPad, and Mac laptops.

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

Large deposits of lithium can be found in 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.

Top Lithium Mining Stocks

Livent Corp. (NYSE: LTHM)

FMC Corporation (NYSE: FMC) This international conglomerate operates its business in three segments: FMC Agricultural Solutions, FMC Health & Nutrition, and FMC Lithium.

After years of speculation, FMC separated its Lithium business from the main conglomerate in a 2018 public offering. Today, FMC Lithium trades as Livent Corp. (NYSE: LTHM).  Livent offers lithium for use in batteries, polymers, greases, lubricants, glass ceramics, and other industrial products. The firm also supplies lithium for pharmaceutical use.

Livent has a billion-dollar market cap and a PE ratio of only 7.97 per share. As a result, it’s undervalued from a PE perspective.

Albemarle Corporation (NYSE: ALB)

Headquartered in Charlotte, Albermarle develops, manufactures, and markets specialty chemicals internationally. The company also produces lithium compounds; including lithium carbonate, lithium hydroxide, lithium chloride, lithium specialties, reagents for applications in lithium batteries.

It has a multi-billion dollar market cap and is a member of the S&P 500. It pays investors an annual dividend of $1.47 per share, another reason to consider making an investment.

lithium stocksSociedad Química y Minera de Chile S.A. (NYSE: SQM)

This Chilean company 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 both lithium carbonate and lithium hydroxide.

The corporation has a multi-billion dollar market cap and pays investors an annual dividend of $1.96.

How To Own The Best Lithium Stocks

ETFs are probably the quickest and easiest way to buy the best lithium stocks because the Global X Lithium & Battery Tech ETF (NYSE: LIT) invests in the entire lithium market. Its goal is to track the performance of the Selective Global Lithium Index, therefore it’s a good way to invest in the macro-scale growth of the industry.

Some of its top holdings include FMC Corp; Albemarle Corp; Quimica y Minera Chile; LG Chemical Ltd; Panasonic Corp and Tesla. Therefore, investors looking for international exposure should look at LIT.  LIT is listed on the New York Stock Exchange.

Speculative Lithium Mining Stocks

Junior miners are probably the most speculative lithium play because they are exploratory companies who search for lithium deposits. They produce little to no lithium because they focus on owning and leasing property rights.

In the lithium industry, most junior miners rely on outside financing during the exploration phase. As a result, they frequently use secondary offerings to raise funds. Hence, dilution can negatively impact a shareholder value; especially if the company has high levels of debt.

Many of these companies trade on the OTC markets and are also popular among day traders.  Consequently, these stocks can be extremely volatile assets.  Research each company’s management to know if they have a track record for success.

What The Best Lithium Stocks Have In Common

  • A positive return on assets
  • A positive return on equity
  • Gross margins in the mid-30s
  • Dividend yield over 1.5%

 Bottom Line

As demand for electric vehicles continues to rise, lithium stocks could be a big beneficiary of the industry’s expansion. Also, many companies like Apple and Samsung need lithium-ion batteries to power their smartphones and other mobile devices.

The quickest and easiest way to gain exposure is by going the ETF route. However, if you are searching for speculative opportunities, lithium junior mining stocks have good profit potential. They’re also extremely volatile so it’s best to take a conservative approach.

Above all, Lithium stocks have exposure to two powerful growth industries: solar storage and electric vehicles. Plus, it’s a key component of handheld electronics like smartphones and tablets. As these industries grow, lithium could become much more valuable.

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

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