Believe it or not, but lithium is now an integral part of the fourth industrial revolution. This light, white metal is seeing growing demand, which points to a promising lithium market outlook in 2017. You might want to keep an eye out for the top lithium stocks that could explode in 2017.
If you’re a debutant in this space, let me introduce you to this investment idea. Beyond the juggernaut of disruptive technologies like 3D printing and artificial intelligence (AI), there is another technology that’s altering, not only our businesses, but also our planet.
To give you a better picture, let me take you on a trip down memory lane.
It is the year 1973. The world is facing a serious crisis. Arab countries have joined hands for an oil embargo. Oil prices have skyrocketed and threaten to cripple the U.S. economy.
But one man is busy finding a substitute to oil, something that can generate equivalent power to keep our industries and transport running, even if the Arabs hide away all of their black gold.
He wants to build a battery that’s lighter, but more powerful than Volta’s battery. For that, he needs to find a metal that’s light and permeable. Then he sees it. Right there! It’s the first metal on the periodic table.
Lithium! No metal is lighter than that! Stanley Whittingham has laid the first stepping stone of this disruptive technology.
Years later, miles away in England, John B. Goodenough is busy researching Whittingham’s work. Goodenough will become the official inventor of the first lithium-ion battery.
These men unwittingly found a way to alter the geopolitical, economic, and environmental landscape of the world.
Lithium Market Outlook 2017
Three decades and various iterations later, the lithium-ion battery is powering everything from our smartphones to our cars.
It has become powerful enough to run electric vehicles (EVs) without a need for petrol. EVs are now also disrupting the market for hybrids, let alone internal combustion engine (ICE) cars.
The same lithium-ion batteries are also ready to power our houses with the energy harnessed from the sun. Yes, solar roof tiles that could power our houses for generations to come are no longer a wild idea; they’re a reality now. (Source: “Tesla starts taking solar roof orders next month,” Engadget, March 24, 2017.)
SolarCity Corp (NASDAQ:SCTY) and Tesla Inc (NASDAQ:TSLA) CEO Elon Musk’s dream is nearing fruition. Fossil fuels are getting replaced with sustainable green energy. Yes, it’s true, lithium-ion batteries are being substituted for gasoline. In fact, this white metal is being touted as the new gasoline!
It makes sense, because lithium is seeing strong demand from three major sectors: consumer electronics, transportation, and energy utility (residential and commercial).
Believe it or not, but one investment maven saw it coming way before “Mr. Market” did.
China houses the world’s biggest population, with one of the most affluent middle classes. When China buys something, money floods into it. For reference, take the example of the “iPhone.”
So, when the lithium market was about to take off in China, this investor here in the U.S. was closely keeping tabs. He didn’t want to miss the boat on the best lithium stocks.
China made a pledge to solve its growing pollution problem by switching over to green energy. The first step was to reform its transportation industry by making a switch to electric vehicles.
Circa 2008, billionaire investor Warren Buffett jumped on the opportunity and bought 20% of BYD Company Limited (HKG:1211), China’s biggest manufacturer of EVs. That investment has already rewarded him heftily.
Is It Safe to Invest in Lithium?
Buffett was early to the party, yet the opportunity to make money off of this market remains raw.
But here’s a word of caution.
Like any other investment, this one too has its fair share of market charlatans who’ll scramble for an exit at the drop of a hat.
If these short-term speculators end up outnumbering the long-term investors, this could easily blow up into another “tulipomania.” And we know how that turned out for the Dutch.
The market for Lithium is still in its infancy. Even though the lithium-ion battery reached the mainstream over three decades ago, lithium remains incomparable to other heavily traded metals. This is exactly why this metal is not traded in the market like gold or silver, nor does it have a formal futures market. But you still have the opportunity to invest in the best lithium stocks.
There are two ways you could invest in lithium stocks. The first is to look for an indirect position like Buffett. You could replicate his strategy by investing in a similar venture here at home. For that, look no further than Tesla.
After the acquisition of SolarCity Corp, Musk has bet his farm on solar. Today, Musk’s companies sell, not only EVs, but also energy storage solutions in the form of “Powerwall.” But that’s not all. Telsa is now about to roll out solar roof tiles.
The common denominator in all of these products is lithium-ion batteries. In short, this company is 100% lithium-dependent.
So we know what lithium means to Tesla, but what does Tesla mean to lithium?
To gauge that, take Musk’s words on it. He aims to sell a million EVs by 2020. To power a million cars, Tesla will have to absorb all of the world’s lithium-ion production, and will still run short.
Simply put: huge demand, scanty supply.
Lithium Stocks That Could Explode in 2017
The second way to invest in lithium stocks is a concrete direct investment in lithium. Take a look at these three lithium stocks that could explode in 2017.
|Stock||Market Cap||1-year return||5-year return|
|Lithium X (LIX)||$97.25M||30.09%||73%|
|Albemarle Corporation (ALB)||$11.6B||71.05%||80.4%|
|Sociedad Quimica (SQM)||$8.81B||69.7%||-35%|
1. Lithium X Energy Corp (CVE:LIX)
Founded by a young entrepreneur from Vancouver and backed by a billionaire tycoon who, by no coincidence, also drives a Tesla, this Canadian company is named so for a reason.
Lithium X Energy Corp (CVE:LIX) is fully invested in lithium, with projects in two strategic locations. One is in Argentina, the country with the biggest, most high-quality lithium reserves. The other is in Nevada; yes, that’s where Tesla’s “Gigafactory” is building all those lithium-ion batteries.
Compared to the big players in the lithium industry, this company is still very young. But it is interesting that the company insiders have recently been building up their stake in the company. Insider buying should perk up your ears for LIX stock.
2. Albemarle Corporation (NYSE:ALB)
Albemarle Corporation (NYSE:ALB) is one of the two biggest players on the lithium scene. Now, Albemarle may not be a pure play, since lithium is not the only metal it develops, but lithium is definitely one of the top ones in its portfolio. In fact, the company is the biggest lithium developer in…drum roll…Nevada!
But what really piques my interest is its fundamentals. The company has been around for over two decades, boasts growing earnings, and holds more than enough cash to pay off all of its debt. And the cherry on top? It pays dividends, too!
If that doesn’t get you excited, there’s more.
Argentina, known for its high-quality lithium, is vying to become a “lithium superpower.” And Albemarle, which is already one of the biggest players in the country, is set to make a tidy profit off of it. ALB stock deserves to go on your watchlist before it’s too late.
3. Sociedad Quimica y Minera de Chile (ADR) (NYSE:SQM)
This is another lithium heavyweight you don’t want to miss. Sociedad Quimica y Minera de Chile (ADR) (NYSE:SQM) also develops a number of minerals, but like a few other companies, lithium is its bread and butter.
Similar to Albemarle, SQM has its eyes on Argentina’s lithium boom. The company is currently partnering with a smaller Canadian player, Lithium Americas Corp (TSE:LAC), which boasts a significant hold over Argentinian lithium.
Plus, SQM stock also comes with a bonus of dividends. Here’s a snapshot of the company’s price performance over a span of one year.
Chart courtesy of StockCharts.com
Bottom Line on Lithium Market Outlook 2017
Professor Goodenough’s invention kicked off a “green revolution” that is bringing the oil monarchs down on their knees. With names like Musk and Buffett investing in lithium battery stocks, there’s a good chance that lithium stocks could explode in 2017.
But, as an investor, you must stand guard. Don’t forget A123 Systems LLC !
Back in 2009, the company went public as one of the biggest suppliers of lithium-ion car batteries. The initial public offering (IPO) was a stunning sight. Stock prices surged 50% in one day, and this lithium stock was selling like hotcakes. But, only three years later, the company filed for bankruptcy.
To avoid another fiasco like A123 Systems, do your research before investing.
Regardless, the future of lithium market looks bright. Demand for lithium is coming from left, right and center. Only one word in my dictionary defines the lithium outlook right now.