Are Lithium Stocks Set for Success?
The best part of the tech sector, especially when compared to other industries, is that you get to invest on the cusp of tomorrow before everybody else. The ability to jump in on products that will shape the future before they’ve hit the mainstream is one of the reasons that so many tech companies are hitting it big on the stock market.
And that’s why many investors are eager to know more about the lithium market, with its potential for future growth looking to be limitless, considering all of lithium’s applications in the tech field. So, are lithium stocks about to encounter a giant bull rush?
The best lithium stocks have experienced multiple surges over the past few years, and the technology on the whole is quickly turning into a product that investors do not want to miss out on. But is this mineral fool’s gold or the real deal?
The question ultimately rests on whether you believe that lithium has staying power. The numbers, at least for now, are hard to beat.
Lithium Consumption and Application
First, you have two areas where a lithium-ion battery is essential: Electric car production and grid power storage. These two uses, along with overall growth, helped pushed the demand for lithium by 26% in 2016, with an expected 39% growth in 2018, followed by 73% by 2025. (Source: “5 Canadian lithium stocks to play surging battery demand,” Financial Post, October 17, 2016.)
And the cars of the future are more than likely going to be powered by lithium, which is great news for lithium stocks.
One great example of the potential in the industry—and also the drawbacks—can be seen in the political battle taking place over the Corporate Average Fuel Economy (CAFE) standards.
Implemented under the administration of Barack Obama in order to reduce the average fuel consumption rate of vehicles in the U.S., the standards initially called for automakers to have fleets with an average of 36mpg. (Source: “Final Determination on the Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards under the Midterm Evaluation,” United States Environmental Protection Agency, last accesses May 1, 2016.)
The important part here is the word “average.”
If automakers are seeing huge sales for SUVs, they’re not going to cut back on production but, at the same time, they need to hit those government mandated numbers. The solution? More electric zero-emission cars produced to help balance those numbers out. This would help propel the lithium market by increasing the production of electric cars.
This is one example of the government being on the side of lithium stocks, helping push the shares higher through demand. Other programs, like the Zero Emission Vehicle (ZEV) program in California, also push electric vehicles, with ZEV and similar programs boosting sales of companies like Tesla Inc (NASDAQ:TSLA). (Source: “What is ZEV?,” Union of Concerned Scientists, October 31, 2016.)
But remember I mentioned a drawback?
While the U.S. government did seem firmly entrenched in its support of zero-emission cars over the past few years, the new administration of President Donald Trump has already begun challenging some of the old regulations.
Trump has called for another review of the program and, while the process to change the emissions guidelines would be lengthy and difficult due to a number of state laws and the complexity of the system, there’s a chance that Trump could not only slash the current Environmental Protection Agency (EPA) CAFE standards, but also even attack state programs like ZEV.
This type of volatility in both directions could have far-reaching effects on the demand for the lithium-ion battery.
Couple this with the growing value of lithium, in which the price of a metric ton of battery-grade lithium grew from $5,180 in 2011 to $6,400 in 2015. (Source: “Lithium,” U.S. Geological Survey, January 2016.)
Between better demand and better prices, there’s a lot to like in the lithium market, even though there are some concerns for investors.
And remember that although batteries are the largest and fastest growing application of lithium, they still only account for about one-third of the total lithium consumption. Batteries are important, but they’re not the whole market.
And lithium batteries, or companies that use lithium batteries, are by no means the only way to invest in the best lithium stocks. Some may prefer to hit the lithium mining companies, which I’ll cover further below.
Should You Invest in Lithium?
So, let’s dive down into the best lithium stocks, keeping in mind that the industry is a volatile one and that it may not be all it’s cracked up to be.There’s a lot of argument on both sides on whether to invest in lithium. Some analysts view it as yet another tech fad that could sink investors. Others project lithium as one of the next big commodities that could help make a lot of people very rich with some savvy investing.
Albemarle Corporation (NYSE:ALB) is the largest lithium stock in the world, with a market cap of $12.2 billion and a reported 35% share of the world’s lithium market. It’s not hard to see why ALB stock is one of the best lithium stocks around.
The company has gained over 25% in share value since 2017 began, and 63% over the past 12 months. Remember, this isn’t some penny stock; this is a legit, strong, and stable company that has its fingers in a lot of different pies besides lithium.
That is another reason that Albemarle is one of those lithium stocks to watch.
While it obviously has a big share in lithium, the fact that the company is not solely reliant on the commodity or some version of the “Look, I found the best lithium mine in the world!” hype-train means you have a stable investment that could be boosted by lithium or hurt by it, but is unlikely to be sunk in the worst-case scenario.
With an expanding base of operations on lithium mines and a strong foundation around the company, ALB is one of the best lithium mining companies.
A rather steep departure from my last two selections, Critical Elements Corp (CVE:CRE) is a lithium penny stock that could see massive gains in the next few years, at the risk of being left behind if the whole bull rush turns about to be more bluster than substance.
While Tesla and Albemarle are solid companies through and through, CRE stock is a riskier play for investors looking for a low barrier to entry and with the chance to see some big returns…at the expense of security.
The company has shot up nearly 50% since the beginning of 2017, and 157% over the past year. It’s a company on the rise, and is one of the more solid lithium penny stocks to jump in on.
As such, it is another one of the best lithium stocks available right now to invest in, so long as investors don’t mind the extra volatility that comes with the territory.
The Future of Lithium Stocks
It is quickly going to be make-or-break time for the industry, or at least, for the doubters. With analysts who are sour on lithium pointing to an easing in the market and a lowering of prices in the near future, if lithium can prove them wrong and continue to rise, it would quickly become an investor’s dream.
The best lithium stocks I’ve ranked here provide savvy investors the option to get in on the lithium market while exposing themselves to as little risk as possible.