When people think about investing in metals and minerals, they usually think about noble metals and precious stones. With good reason as they offer great protection against inflation and are great sources of investment in their own right. That being said, there's something to be said about investing in the more humble elements.
Lithium might not necessarily be an element that comes first in one's mind as a great source of investment, but the truth of the matter is it's an element that is essential in a vast number of industries. By virtue of this fact, lithium is an element that is in demand almost constantly. When you have stocks, either in a company that manufactures or deals in lithium, your profits are almost as good as assured.
The share prices will most likely rise in time, so you have the added protection of a rising stock price.
Now, this is ideal for buying stocks as many times you can buy shares at a low price initially and sell them at a much higher price before they come back down. As with all investments though, there are risks to take into consideration which we'll get into later on in this article. For now though let's look at some of the best lithium stocks that you should invest in for 2021. So without further ado, read on below to find out more about some of the best lithium stocks for 2021.
So what does it mean to be one of the "best"? Well first off it means that these companies offer great potential for investment. All of these companies have very good balance sheets, so much so that you can bet high on their stocks and know that they'll be able to recover from a bad run. Second, it means that the potential returns on these investments are very high as well.
Now this doesn't mean to say they are all safe investments as we always talk about in our investment guides, but rather that the best lithium stocks come with the highest rewards if you play your cards right. And with that out of the way let's get into talking about what exactly is lithium and why it's important both commercially and industrially?
Lithium does not exist freely in nature which might seem strange when you consider how useful this element is. Instead, lithium exists as either Lithium Iron Silicates which are usually found in igneous rocks or some salts such as the one that's extracted from brine pools.
Truly though, without Lithium, there would be no computers, cell phones, tablets and much more.
This essential element does a lot of work in our everyday lives so if you're looking to invest into something that will help drive industrial growth in the near future then why not go with an element that properties over 300 uses?
While it might have been difficult to do nowadays given how popular mobile devices are, 30 years ago there were only a handful of uses for lithium-ion batteries. Nowadays laptops, cell phones, tablets and yes even power tools can all make use of these incredible battery packs. So it's without a doubt that Lithium companies will be able to rely on steadily growing demand from industries such as the computer and mobile device manufacturers in the coming years which is great news for investors.
So when looking at investing in this rare metal we need to look out for two things: first off, stocks that are involved with manufacturing or deal with lithium-ion batteries directly, and second a strong balance sheet so that you have something to fall back on if your investment doesn't turn out well.
The Best Lithium Stocks we're watching in 2022
So, what are the best lithium stocks? Though there are choices abound, we have taken the liberty of compiling the 10 best lithium stocks (in our humble opinions) that are sure to make you a pretty penny.
As you likely know, a lot of major companies such as Apple Inc. ( AAPL ) and Tesla Motors Inc. ( TSLA ) rely on lithium ion batteries so investing in them is something that will give great returns for investors in the long run.
The problem with these two stocks though is that they are very volatile which could scare away some people who are looking to make a safe investment such as retirement funds for their kids college education etc.. So what better way to go about it than buying shares of a company that deals indirectly with lithium?
1. Piedmont Lithium Limited (NASDAQ:PLL)
- Value of Hedge Fund Holdings: $20 Million
- Market Value: $1.45 Billion
Though a relative newcomer to the lithium market, PLL is dead set on becoming the largest domestic supplier of lithium hydroxide for all sorts of batteries. And with its ongoing project in North Carolina, it's certainly on its way to making that goal come true.
Along with that, PPL also recently made a 5-year binding agreement to supply Tesla. This is set to begin around July of 2022 or 2023 -- having PPL stocks before that time will place you in an optimal position to capitalize on this deal's profitability.
At the end of the fourth quarter of last year, 4 hedge funds held stocks in PPL and the shares have rallied more than 600% over the last 12 months alone.
2. Lithium Americas Corporation (NYSE: LAC)
- Value of Hedge Fund Holdings: $33 Million
- Market Value: $2.12 Billion
LAC has a long history as one of the largest producers of lithium in the world, the company possesses facilities in Argentina and Nevada, though the company's headquarters is found in Vancouver, Canada. These several facilities have ensured the company's steady growth throughout the passing decades.
Though reporting a loss at the third quarter of 2020 (completely normal for a mining company during the pandemic), by December of the same year the company saw investment from 11 hedge funds and a clear rebound in prices.
The biggest of the stakeholders is Axel Capital Management which possesses upwards of seven hundred thousand stocks worth about $9-10 million.
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3. Albemarle (NYSE: ALB)
- Value of Hedge Fund Holdings: $126 Million
- Market Value: $20.29 Billion
Definitely one of the more well-known sources of lithium, Albermarle Corporation is a North Carolina-based chemical company with an undeniable track record.
The company produces lithium batteries for electric vehicles and, collectively with Sociedad Química y Minera, and FMC Corporation produces about half the world's total lithium and lithium storage. It is also a manufacturer of flame retardants with plants in the US, Belgium, Austria, France, UK, and China.
By the end of the year 2020 alone, the company reported a net income of $84.6 million. Over the last 12 months, the stocks have rallied over 70%. The company also offers a dividend yield of 0.96% which many investors are thankful for.
Recently though, the company has seen a dip in sales, citing the low prices of lithium brought on by the effects of the pandemic. Despite that though, analysts are optimistic and believe that prices will rebound -- forecasting a future price of $190 per stock compared to the current price of $160.
21 hedge funds currently hold stocks from Albermarle, the largest being Citadel Investment Group with a number of stocks worth $51 million.
4. Livent Corp (NYSE: LTHM)
- Value of Hedge Fund Holdings: $214 Million
- Market Value: $3.17 Billion
Lithium chemicals are produced by Livent Corporation and are mainly used for batteries, aerospace alloys, agricultural chemicals, and other heavy industry applications. Despite its wide array of customers though, the company was awarded the gold standard for sustainability by EcoVadia.
In financial matters, the company garnered $82 million in revenue by the end of the fourth quarter of 2020. There are currently over 20 hedge funds investing in Livent Corporation with Joho Capital increasing its shareholdings by more than 70%.
5. Sociedad Quimica y Minera (NYSE: SQM)
- Value of Hedge Fund Holdings: $169 Million
- Market Value: $13.43 Billion
Based in Chile, this company focuses on a large variety of applications for the chemicals it produces. They are a leading producer of lithium, iodine, plant nutrients, and other such compounds used in industrial manufacturing.
It is one of the largest producers of lithium in the world, seeing $505 million in revenues from the chemical in 2019.
Shares have rallied over 98% over the past 12 months and the company offers a 1.86% dividend yield -- quite high when compared to the others in the same industry. The price target of the company has been increased from $70 a share.
There are currently 14 hedge funds investing in Sociedad Quimica y Minera with the Citadel Investment Group being the largest stakeholder at $55 million.
6. EnerSys (NYSE: ENS)
- Value of Hedge Fund Holdings: $139 Million
- Market Value: $4.13 Billion
When it comes to providing lithium-powered energy to homes and industries alike, EnerSys is the company at the forefront. It produces and manufactures lithium batteries, battery chargers, power machines, and even battery accessories.
It provides quarterly dividends to its shareholders and, just this February, provided its investors with $0.175 per share. As of December of 2020, 24 hedge funds are investing in Enersys with Rubric Capital Management owning the most with $35 Million worth of shares.
7. Energizer Holdings, Inc (NYSE: ENR)
- Value of Hedge Fund Holdings: $170 Million
- Market Value: $2.92 Billion
Who here is not aware of the household battery seller? More than just the make of usual batteries we buy from the store, Energizer also produces lithium batteries for industry use as well.
Starting in February, the company has announced a quarterly dividend of $0.30 which is welcomed news among shareholders. There are 28 hedge funds holding stocks with Energizer with GAMCO Investor holding the most with shares worth $74 Million.
8. Johnson Controls, Inc. (NYSE: JCI)
- Value of Hedge Fund Holdings: $765 Million
- Market Value: $50.6 Billion
Though based in Ireland, the company has some big plans for expansion. Recently, the US has granted the company permission to manufacture hybrids and electric vehicles. The company is also known for manufacturing HVAC, and fire safety equipment.
The company offers a 1.85% dividend yield and has expressed commitment to expanding its operations. There are currently 34 hedge funds investing in Johnson Controls Inc. which is much higher compared to the 24 hedge funds of the third quarter of last year.
9. Quantumscape Corporation (NYSE: QS)
- Value of Holdings: $1.84 Billion
- Market Value: $10.18 Billion
Probably the best thing about buying a Quantumscape Corporation stock is its newness to the market. In it, there's so much potential for growth that it's no wonder why the start-up is backed by the likes of Bill Gates and Volkswagen.
The main thing the company develops is solid-state lithium batteries for electric cars. They're seen as a revolutionary green solution to the current car and fossil fuel industry. A testament to their popularity is the fact that by the end of last year, the company had 35 hedge funds investing in the. A staggering increase from the 14 hedge funds just a quarter earlier.
10. FMC Corporation (NYSE: FMC)
- Value of Holdings: $571 Million
- Market Value: $13.87 Billion
In a global scope, FMC is one of the most highly valued lithium stocks in the entire world. Collectively with Sociedad Química y Minera and Abermarle, produces about half the world's total lithium and lithium storage. This is an American chemical manufacturing company that originated in Pennsylvania. The company had a start building amphibian vehicles during WWII and continued to diversify its industries after that.
In 2017 alone, the company garnered $2.7 billion in revenue. This increased to $4.8 billion in the succeeding year. Recently the company announced a dividend increase of $0.48 per share -- up by 9.1% from its previous yield.
45 hedge funds are investing in FMC as of the fourth quarter of last year. The largest of these is Pelham Capital with over $119 million worth of stocks.
Bottom Line on Lithium Stocks
Part of why lithium stocks are a good stock to have in your portfolio is the growing demand for electric vehicles. China's government alone has set high goals for the public's transportation to shift primarily to electrical. Sales are up by 1.9 million electric vehicles in 2020 -- 50% more than the previous year.
The government targets an increase of sales by 20% before 2025. This, along with the shift happening in the rest of the world for cleaner vehicles, means that the demand for lithium batteries will only increase in the coming years.
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