Lithium stocks are getting more popular among investors in the stock market today. This appears to be the case after lithium demand began to show signs of outweighing supply. The metal has long been used for industrial purposes, helping to create the likes of glass and ceramics. But today, it is mostly used as a key component in batteries that power everything from smartphones and laptops to electric vehicles. The supply concerns have undoubtedly put huge pressure on lithium, ultimately affecting top lithium stocks. A sharp increase in supply, the U.S.-China trade tensions, and the pandemic contributed to the concerns.
However, before you know it, we would be facing a shortfall all over again. And that’s thanks to the rising demand for electric vehicles. If you have been following our site, you would know that we are big fans of EVs. Investors may want to check out the Global X Lithium & Battery Tech ETF (LIT Stock Report). The ETF captures the performance of a basket of lithium stocks. The ETF saw an increase of nearly 120% since March, easily outperforming the S&P 500 and Nasdaq Composite. The big question here is, is it too late for investors to be buying top lithium stocks now? If you believe the EV boom is going to take place, now might be the time to jump in. I certainly plan on jumping in.Tesla’s Battery Day Sent Lithium Stocks Flying
Lithium stocks naturally are subject to the price of lithium. And the most obvious source of demand today would be from the higher electric vehicle sales. And what appears to be getting the ball rolling was the deal between Tesla (TSLA Stock Report) and Piedmont Lithium (PLL Stock Report). After all, Tesla stated that the lack of lithium is a major reason preventing it from dominating a pie of the industry larger than what it already has.
While it could be tempting to chase PLL stock when the hype is surrounding this particular stock, it need not be the game. Don’t get me wrong though, I’m not saying that it has no potential. It makes sense to trade on momentum, but investors are also encouraged to look into more established lithium suppliers. Perhaps, they could be a value buy? That said, do you have these top lithium stocks to buy on your watchlist?
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Shares of Livent (LTHM Stock Report) are making another huge jump this week. In fact, for the past 5 trading sessions, the stock has jumped around 30%. Again, there wasn’t any specific news that moved the stock higher in recent weeks. The jump in LTHM stock could simply be because of the Piedmont-Tesla deal which lifted all boats. Even today, investors appear to be still digesting the news from Tesla’s Battery Day. With a fair share of bulls and bears taking part, lithium stocks like LTHM can be rather volatile to trade.
Livent is a pure-play lithium producer formed when FMC spun off its lithium business in October 2018. From its early days, LTHM stock was traded above $16 a share during. But since then it has stagnated and is now trading around $11.4 per share. Now that the company appears to be exhibiting strong bullish momentum in recent weeks, is it time to include LTHM stock on your watchlist?
Of course, if you are an investor looking for a long term lithium exposure, there may be alternatives higher on the list. But if you are a trader looking to profit from the news of lithium and batteries, this is a relatively nimble stock. But then again, the company’s lithium portfolio will still benefit from the rising demand in the industry. The question is, will you be willing to handle the volatility?Top Lithium Stocks To Buy [Or Avoid] Right Now: Sociedad Química y Minera de Chile
Sociedad Quimica y Minera de Chile (SQM Stock Report) emerged as one of the best lithium stocks to buy right now. That’s considering its strong commercial-scale supplies capability. Now, many may have reservations given the foreign name. Perhaps Piedmont or Albemarle (ALB Stock Report) should have topped the list, you say. But let’s take a look at why many believe SQM is in a strong position to be able to meet the rising demand for lithium.
As the name implies, the company is based in Chile. Chile has the world’s largest lithium reserves. The country has 8.6 million metric tons of lithium, according to Statista.com. That amount is three times the reserves of the next country, Australia. It is perhaps a no brainer then, to suggest that Chilean companies or at least companies with strong Chilean presence are likely to be frontrunners of this lithium race.
Admittedly, SQM stock isn’t cheap. It is trading at a valuation of over 39 times trailing earnings. But it is cheaper than some of its peers. Besides, it has a stronger balance sheet with lower debt than even Albemarle. SQM has annual sales of $1.8 billion, putting it ahead of many rivals in the industry. The company has generated positive free cash flows every year for at least 10 years now. Given its strong track record, there is little doubt of the company’s ability to scale up and meet the rising demand for lithium batteries. With that in mind, is Sociedad Quimica y Minera the best lithium stock to buy and hold for the long term?
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Like Sociedad Química y Minera de Chile, shares of Lithium Americas (LAC Stock Report) are also moving in the opposite direction when some of the lithium stocks were trading in the positive territory during Tuesday’s intraday trading. While LAC stocks started to gain momentum after Battery Day, that’s not the only reason why the stock almost doubled in value in recent weeks. California’s push towards electric vehicles by banning vehicles running combustion engines by 2035 could also be the reason for bulls to take charge.
Analysts have reported a potential crunch in lithium supply. As carmakers from Tesla to Volkwagen continue to increase the production of electric vehicles, demand for batteries will rise. And that means there will be a more pronounced need for lithium to make the batteries. Currently, neither Piedmont nor Lithium Americas could produce lithium metal at scale. So, why was PLL stock continuing to pop while LAC stock was dropping?
And guess what. The difference is that Piedmont has entered into a supply agreement with Tesla. Lithium Americas did not receive such a boost. Of course, Piedmont’s deal may have conditions attached. That is, the company may need to be able to begin deliveries before July 2023. And this is far from certain. So PLL shareholders probably shouldn’t be popping their champagne bottles just yet. Still, not having a deal like what Piedmont did appears to be the reason holding investors back from investing. However, if you believe the EV revolution would come soon, Lithium Americas stands an equal chance just like other lithium suppliers, doesn’t it? So, when investors are rewarding other top lithium stocks, is LAC stock an anomaly that you can profit from?