The Top 5 Lithium Stocks to Buy Now

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2020 was a crazy year for electric vehicles: Tesla exploded 695%. Nio ripped higher 1,110%. Blink Charging charged ahead 1,790%.

Think you’ve missed the boat on the electric vehicle (EV) craze?  Think again. The rise of EVs is a multi-decade story that will make early investors millions. 

In fact, research firm IHS believes electric vehicle sales will rise by 52% per year over the next four years, growing to a total of 12.2 million cars by 2025! It could be even faster as the Biden Administration is likely to embrace policies to encourage EV adoption and renewable energy.

One by one, traditional automakers are throwing in the towel and admitting the future is all-electric. In just the last year we’ve seen numerous carmakers commit to electric vehicles:

  • Volkswagen aims to have EVs grow to 50% of sales in North America by 2030.
  • Not to be outdone, BMW is vowing to bring battery-powered models to 50% of global sales by 2030.
  • General Motors has one of the most aggressive totals, committing to a fully-EV portfolio by 2040.

Notice this doesn’t include the dozen EV-only startups that have exploded on the Nasdaq in recent years and command valuations approaching traditional automakers.

But what if there was a better way to invest in the EV craze?

Best Lithium Stocks for 2021

I’ve created a list of the top 5 Lithium stocks, segmented into upstream and downstream companies. Keep reading for an in-depth analysis on each company. You can also click the links below to jump to a specific stock.

  1. Albemarle Group: Largest U.S. mining lithium stock
  2. Livent: Up-and-coming with room for growth
  3. SQM: Located in the lithium triangle
  4. BYD: Backed by Warren Buffett
  5. QuantumScape: Bill Gates loves this stock!

Upstream Lithium Stocks

Lithium mining stocks are poised to win from the growth of lithium-ion batteries regardless if they’re in Tesla (Nasdaq: TSLA), NIO (NYSE: NIO), XPeng (NYSE: XPEV) vehicles. The barriers to entry for heavy extraction are high on account it’s a capital-intensive business and requires years of negotiation and planning to open a new site.

These factors keep new entrants into the space low and incumbents in a virtual oligopoly. The “Big Five” lithium compound producers accounting for 64% of lithium production in 2019. 

Remember, mining is a commoditized business. Performance will heavily be impacted by the demand and by lithium prices, which will likely have a degree of volatility over time. Therefore, in the event technology improves and leads to lower lithium loads per battery, or a substitute element proves superior these companies could suffer. 

Additionally, many lithium operations are in foreign locations like China, Chile, and Zimbabwe and could be impacted by governmental interference and regime change. Even business-friendly governments like the Australian parliament could enact mining regulations and impact results.

Albemarle Group (NYSE: ALB)

  • Price: $212.75 (as of close Jan 21, 2022)
  • Market Cap: $24.887B
  • Revenue Growth: 2.18%
  • Revenue: $3.1 billion
  • Projected Sales Growth by 2025: 70%

Located in Charlotte, North Carolina Albemarle Corporation is among the biggest U.S-based lithium producers in the world and the largest headquartered outside of China. Last fiscal year the company reported $1.1 billion in lithium revenue across 12 worldwide mining sites, a 16% decrease due to lower production during the pandemic. 

However, Albemarle is expecting that growth rate to reverse and rapidly increase amid crushing lithium demand. The company expects lithium demand to increase threefold by 2025, driven by EV battery applications that are predicted to grow 47% per year during that period. 

Albemarle is investing to meet that demand. The company is doubling down on domestic production via its Silver Peak Nevada site with the goal to double capacity by 2025 (if only there were a large Gigafactory nearby…). 

Investors are seeing the vision: the stock barely sold off upon the February 2020 announcement Albemarle was issuing nearly $1.3 billion of shares, a near 7% dilution, in February to double down on its lithium mines in Australia, Chile, and China in addition to the Nevada buildout.

Shares have advanced nearly 140% in the last year, which is modest considering the stock price explosion from EV automakers during that time.

Still, shares of Albemarle are richly valued for a capital-intensive industry, trading at 5 times sales and a PE ratio of 45, so the market is pricing in growth. However, Albemarle is the biggest U.S. lithium stock and the company is poised to take advantage of the growth of EVs. 

Livent (NYSE: LTHM)

  • Price: $21.91 (as of close Jan 21, 2022)
  • Market Cap: $3.54B
  • Revenue Growth: 33.51%
  • Revenue: $288 million
  • Projected Sales Growth by 2025: 143%

If you’re unfamiliar with Livent Corporation, that’s understandable. The company has only traded on the public markets for two years, the product of a spin-off from agricultural-focused FMC Corporation. However, don’t let the lack of familiarity prevent you from knowing a lithium stock with an 80-year history of production experience. 

Unlike Albemarle, Livent is a pure-play fully integrated lithium company with industrial uses running the gambit but increasingly the company is focusing on EV applications. The company has spent 11% of its total market capitalization into growth capital expenditures in the last three years alone to take advantage of this opportunity. 

The company’s strategy is working. Livent was able to extend its lithium hydroxide supply agreement with Tesla and further discussions are taking place for a long-term partnership. Investors have responded in kind, pushing up the lithium stock to the tune of 200% in the last year alone. 

Like all stocks, Livent has risks. We love smaller-cap stocks with the potential to grow here at Millennial Money, but there’s a downside as well: being a smaller company means less capital resources, which could prevent the company from spending on acquiring mines and increasing production during the lithium boom. 

To date, that hasn’t been an issue and Livent is one of the “big five” lithium producers, so we expect strong returns as demand for lithium spikes. 

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

  • Price: $54.61 (as of close Jan 21, 2022)
  • Market Cap: $15.599B
  • Revenue Growth: 29.07%
  • Revenue: $1.8 billion
  • Projected Sales Growth by 2025: 118%

Although it calls the New York Stock Exchange home, Sociedad Química y Minera de Chile, or SQM, is a Chilean-based mining company While the company isn’t a pure-play lithium stock — it has a significant lithium presence among its other high-profile products — last year lithium and derivatives were 21% of the company’s total revenue and the company is considered one of the big five lithium miners. 

Being a Chilean-based company has its advantages, at least for lithium production. Chile is in the middle of the area known as the lithium triangle, along with Bolivia and Argentina. China might be known as the lithium capital on account it produces nearly two-thirds of batteries and has the most processing facilities, but its production is only half of Chile’s. 

Due to its very location, SQM is firmly situated to benefit from the growth of electric vehicles and has favorable relationships with South American governments. Often foreign lithium producers must form joint ventures or offer concessions to break ground in foreign countries. 

As a domestic producer, SQM understands the unique issues facing the area is well-situated to benefit from the increased demand for lithium. Investors have bid up SQM shares 195% in the last year but the long-term story is still intact. 

Downstream Lithium Stocks

Mining could be the safest play in the lithium stock space, but the commodified nature of the sector could limit long-run returns. Many are increasingly looking for the battery technology companies that will also benefit from increased EV adoption, but can produce higher-margin products and can shape the EV market for years to come. 

Understandably, this would be a high-interest corner of lithium stocks. Without the technological breakthroughs in EV batteries, incredible demand growth for lithium would not even exist! The technology in this space has progressed at a breakneck speed and has significantly lowered costs. In fact, EV battery costs have decreased 90% since 2010.

A word of caution here, there’s more risk in these downstream lithium stocks on account of how technology can quickly become irrelevant as soon as another company creates a better mousetrap.

And with potentially trillions in worldwide profits on the line, you can bet the brightest minds are working non-stop on new breakthroughs. You don’t have to take our word for it as some of the brightest investors in the world are lining up to buy these lithium stocks.

BYD (SEHK: 1211), (OTC: BYDDF)

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  • Market Cap $74 billion
  • Revenue: $22.5 billion
  • Projected Sales Growth by 2023: 90%

Goodbye Jack Ma, hello Wang Chuanfu! Chanfu is known as the Henry Ford of China and for good reason, in the past 15 years he’s taken the company from less than a billion in sales to more than $20 billion today. If you don’t believe me, how about Warren Buffett? The Oracle of Omaha is a large investor in the company and has made nearly 3,000% on the investment!

BYD makes a lot of products ranging from automobiles to rechargeable batteries, but lithium-based EV technology is a large component. Most importantly, not only is the company a leader in battery technology but controls its own manufacturing. The vertical integration allows the company to innovate and drive down EV battery costs, which have dropped by 90% since 2010. 

We’re quickly reaching an inflection point where EV costs are on par with ICE autos and then demand will explode. However, BYD doesn’t have to directly sell autos to take advantage of this market shift. Last year the company inked a major deal with Ford to supply EV batteries for its Chinese models and the company is in talks with Hyundai for a similar deal. 

Look for the company to continue to narrow the price differences between EVs and traditional vehicles. BYD’s battery tech will continue to improve and drive costs down. Investors agree and have bid the stock up last year as shares of its OTC (BYDDF) exploded to the tune of 457% during that period.

QuantumScape (NYSE: QS)

  • Price: $15.72 (as of close Jan 21, 2022)
  • Market Cap: $6.643B

We’ve discussed the potential of electric vehicles but haven’t discussed the current issues that make it inferior to the traditional internal combustion engine (ICE). 

Gasoline might be expensive and climate destroying, but replenishment is fast because we’ve established a network of “charging outlets” (gas stations) and invested in the technology to refuel in minutes. Unfortunately, a competing technology doesn’t exist for EV models. 

A Tesla supercharger takes 15 minutes to recharge up to 200 miles, and that’s if you can find one! Even the best batteries take at least an hour to charge, leading many potential buyers to have range anxiety and default to interna ICE vehicles.

Enter battery technology company QuantumScape. The company is developing solid-state batteries. The promise of this technology is it provides extremely fast charging and significantly higher energy density than today’s battery technology. 

How fast? Well, in extensive testing, batteries should allow drivers to charge their electric cars to 80% of their full capacity within just fifteen minutes from household sources and last around 12 years in normal use. 

As always, what works in the lab and at full-scale production can be quite different, but the company has had enough promise to attract Microsoft founder and former richest man Bill Gates, which was an early investor. 

He’s not the only one to see the value in QuantumScape’s potential. The company was valued at $3.3 billion in the SPAC deal that brought it public, but is now worth more than $20 billion today. That’s growth of more than 500% in less than a years’ time!

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Lithium Stocks are the Oil Stocks of the 21st Century

Mark Twain said, “history doesn’t repeat itself, but it often rhymes.” The rise of cars made oil the world’s most valuable resource last century. Oil tycoons John D. Rockefeller and John Paul Getty each rose to claim the title as the richest men in the world. 

Cars still need a fuel source, but it’s no longer a black liquid. Instead, it’s lithium that’s needed to fuel the EV explosion and clean energy future.

Simply put, lithium is the oil of the 21st century and lithium stocks will be the new oil stocks.

Many investors understand the promise EV but are looking for better ways to participate in the biggest change in automobiles since Henry Ford created the assembly line to crank out his Model T automobile. Investors should have exposure to lithium stocks so they can benefit regardless. 

Lithium Production Stocks vs. Lithium Technology Stocks

There are many ways to invest in the increasing demand for EVs. Unfortunately, over the last year investors have disproportionately paid for EV automakers, throwing money at every EV SPAC regardless of their competitive positioning or long-term plan monetization plan. 

We’ve seen this before with internal combustion engines and it doesn’t end well for most companies. Ask John DeLorean, there are more than 1,000 automakers that have failed in the United States alone! Point being, while many EV companies may survive and thrive, if history is any indication, most will fail.

However, there is a resource that will be in high demand across the industry regardless of which electric automakers win or falter. 

It’s conceptually easier to think of these lithium stocks like the oil industry. The lithium industry has “upstream” exploration and production lithium companies, aka miners, and “downstream” companies working to convert lithium to finished products (batteries) while working to improve the technology and to lower battery costs. 

All the Lithium Stocks You Can Invest in Right Now

While we’ve featured some of our top lithium stock ideas above, with the incredible growth of electric vehicles, there is no shortage of ways to invest across lithium demand. If you’re looking for more lithium investing ideas, we recommend you look to the following places. 

Global X Lithium & Battery Tech ETF (NYSE: LIT) 

The Global X Lithium & Battery Tech ETF first began trading in July 2010, making it one of the more long-lived ETFs built around electric cars and related growth trends. 

As of March 24th, 2021, the fund had more than $2.5 billion in assets had returned 167% across the prior year. The best part of the Global X Lithium ETF is it gives broad exposure without having to constantly manage a basket of individual stocks. In addition, the ETF isn’t overly dependent on Elon Musk alone, Tesla is just 5.5% of net assets. 

Beyond Albemarle, which we already featured, LIT features lithium stocks across the supply chain. Battery suppliers include Panasonic and LG Chem, while it also provides exposure to Chinese lithium stocks such as Ganfeng, the largest lithium producer inside China.

HoldingStock % of ETF Holdings
1ALBEMARLE CORP12.516
2GANFENG LITHIUM CO LTD-A6.115
3PANASONIC CORP5.662
4SAMSUNG SDI CO LTD5.479
5TESLA INC5.470
6BYD CO LTD-H5.053
7QUIMICA Y-SP ADR5.015
8CONTEMPORARY A-A4.963
9EVE ENERGY CO LTD-A4.725
10LG CHEM LTD4.467
As of March 24, 2021. Data from Global X

Lithium IPOs

While ETFs are a great way for getting diversification across the lithium industry, they often won’t capture new entrants to the space. 2021 is tracking to be the biggest IPO year ever, and some lithium companies are part of the shift toward public markets.

Li-Cycle is one company you may want to keep on your watchlist. With lithium being a very in-demand resource, one strategy for both decreasing the overall demand for lithium and being more environmentally-friendly is developing new recycling strategies. That should be an important market, as the rising tide of electric car sales every year also means more electric batteries will be hitting their end of life every year. Li-Cycle is currently trading under the ticker symbol PDAC (its going public via a merger with Peridot Acquisition Corp.). Once the merger closes it will trade under the ticker symbol LICY on the New York Stock Exchange.

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