In this article we present the list of the top 11 lithium and battery stocks to buy now. If you’re in a hurry to see the stocks involved in developing and supporting this future technology, you can jump straight to the 5 best lithium and battery stocks to buy today.
Lithium batteries are primary batteries that have metallic lithium as an anode that is primarily mined in China, South America, and Australia while Chile is the country with the largest lithium reserves worldwide. These types of batteries are also referred to as lithium-metal batteries. They differ from other batteries with their high charge density (long life) and high cost per cell unit. Lithium cells can produce voltages from around 1.5V (comparable to a zinc-carbon or alkaline battery) to around 3.7V, depending on the design and chemical compounds that were used in the battery.
They can be used in portable consumer devices such as smartphones, smart watches, and other smart devices. They are also used in electric vehicles ranging from full-sized vehicles such as radio-controlled toy vehicles. These types of batteries require around 0.15 kg to 0.3 kg of lithium per kWh. As they are designed, these primary systems use a charged cathode which is an electro-active material with crystallographic vacancies that are filled gradually during the discharge.
The lithium-ion battery has become the most sought-after battery for electric vehicles because of its lighter weight, smaller size, and longer life capacity than the other batteries that are available in the market. Some of the major manufacturers of lithium batteries include CATL, LGChem, BYD, and Samsung.
As we step into the more modern-day in our everyday life, technological advancement is undeniable which is why the lithium batteries demand is expected to continuously increase to about 10 times between 2018 and 2030. The global revenues in 2025, for the lithium-ion market, is expected to exceed US$70 billion. With this growing demand, the lithium-ion battery industry is projected to hit 87.54 billion USD in 2027 at 13% CAGR.
The increase in the demand is a result mostly of the projected electric vehicle boom of the world, experts are now projecting electric cars going from 2% market share in the year 2018 to around 25-35% by the year 2030. Added to this demand will be portable consumer devices, other non-car electric vehicles such as the modern-day e-bikes, e-3 wheelers, e-trucks, e-buses, etc, and as well as other energy storage. In 2025, it will have an estimated cost of US$110/kWh per 1 MWh battery energy storage system.
These batteries are used in the most powerful battery-operated vehicles today like the Tesla, which has a powerful battery that is charged by only electricity. This acts as gasoline for the car to run for a certain period of time. In other words, Tesla cars use lithium batteries in order to power up their supercars which is why unlike other cars that require gasoline, Tesla requires no traditional fuel filters, spark plug replacements, or even emission checks. Like electric cars, even brake pad replacements are rare because regenerative braking returns energy to the battery, significantly reducing wear on brakes.
On the other hand, there is also a steady increase in the demand for smartphones with unstoppable development in the phone industry. The smartphone market has a high potential growth rate mainly in the most populated countries in the world like India and China. The smartphone penetration rate in these countries is reported to be lower than 80%. As the production of smartphones constantly increases, the demand for lithium-ion batteries in return increases as well, this promises constant positive demand and revenue for the lithium-ion battery industry.
Currently, the world mines roughly 400,000 tons of lithium in a year, this is enough to power over around 2 million to 3 million electric vehicles, though only a third of that number goes to EVs right now. That number will have to increase perhaps as much as tenfold to meet Tesla’s goal alone, and this doesn’t even take into account other vehicle makers and lithium battery requirements.
Although the lithium and battery industry has weakened during the Covid-19 pandemic brought about by the lower demand in electronic vehicles and consumer decisions of purchasing portable consumer devices, according to a GlobalData survey, the global lithium demand is expected to bounce back from the trauma of the pandemic at an estimated 47,300 tonnes in 2020 to 117,400 tonnes in the year 2024.
In order to produce our list of the top lithium and battery stocks, we first identified all lithium and battery stocks that are traded in a major U.S. exchange. The two main exchanges in the U.S. that we included on our list are NASDAQ and NYSE. These two exchanges are responsible for the majority of the North American and worldwide stock trading. To create the specific rankings that will help you choose what to buy for the best lithium and battery stocks, we used hedge fund sentiment to measure the potential upside of these investment ideas and to predict the movement in the market.
Our in-house research has shown that we can identify a small group of stocks that can outperform the S&P 500 Index on average by double digits annually using hedge fund sentiment data. For example, since March 2017, our monthly newsletter's portfolio of stock picks has beaten the market by more than 66 percentage points (see the details here). We have been publicly sharing some of our monthly newsletter's stock picks as well. In October we shared this real estate stock idea and it is already up more than 50%.
Below we present to you the top 11 lithium and battery stocks to buy now based on our hedge fund sentiment data. These are the most popular lithium and battery stocks among the 800+ hedge funds tracked by Insider Monkey:
11. Piedmont Lithium Limited (NASDAQ: PLL)
No of HFs: 0
Total Value of HF Holdings: 0
Piedmont Lithium Limited is an emerging lithium chemical company focused on the development of its Project in North Carolina. Their goal is to become a strategic domestic supplier of battery-grade lithium hydroxide and other chemicals to the growing electric vehicle and battery storage markets. It is located in one of the premier regions in the world for lithium exploration.
The company reported during their September 2020 quarterly report a signed binding agreement with Tesla, Inc. for the supply of Spodumene concentrate from Piedmont's North Carolina deposit to Tesla. In addition, during their US public offering, they raised a total of $US57.5 million which they will be using to strengthen their goal of becoming America's first new producer of lithium hydroxide in decades.
10. Lithium Americas Corporation (NYSE: LAC)
No of HFs: 3
Total Value of HF Holdings: $3 Million
Lithium America’s Corporation is focused on developing the Thacker Pass project (Which is set to be the largest lithium deposit in the US, with an expected mine life of 46 years). The Thacker pass has the potential to be the leading source of lithium to output on a low-cost and larger scale.
Lithium Americas Corporation ended the 3Q with cash and cash equivalents of roughly US$72 million, including an US$18 million drawn from its credit facilities to fund its Cauchari-Olaroz lithium brine project that is found in Argentina. The company also had US$184 million in undrawn credit. At this point this company is perceived to be a speculative investment and there were only 3 hedge funds with equity positions in it. The most credible of these 3 positions belongs to Michael Gelband's ExodusPoint Capital.
9. Sociedad Quimica Y Minera de Chile (NYSE: SQM)
No of HFs: 12
Total Value of HF Holdings: $115 Million
Sociedad Quimica Y Minera de Chile is a supplier of plant nutrients, lithium, iodine, and industrial chemicals. It is the world’s largest producer of lithium. Its natural resources and key production facilities are located at the Atacama Desert between Chile’s I and II region.
The company’s revenue for trailing twelve months was $1.8 billion. The company also reported earnings per share at $0.01 for the third quarter. This $12 billion market cap company has $1 billion in cash and only $2 billion in debt which is very low compared to other large mining stocks. Since it is profitable, hedge funds aren't cautious about betting this South American company. Driehaus Capital, SailingStone Capital, and billionaire Howard Marks' Oaktree are among SQM's top 5 holders in our database.
8. Livent Corporation (NYSE: LTHM)
No of HFs: 20
Total Value of HF Holdings: $61 Million
Livent Corporation is known as a distributor and manufacturer of lithium chemicals, these lithium chemicals are used for applications in batteries, agrochemicals, aerospace alloys, and other industrial applications.
The company has just been recently awarded the 2020 Gold Status for sustainability performance by the Global CSR rating agency, EcoVadis. This placed the company in the top 3 of all the companies that were evaluated in this group.
The fund's top hedge fund holder was Robert Karr's Joho Capital which had more than $26 million invested in the stock at the end of September. Joho Capital boosted its stake in LTHM by 32% during the third quarter.
7. EnerSys (NYSE: ENS)
No of HFs: 22
Total Value of HF Holdings: $107 Million
EnerSys is one of the stored energy solutions for industrial applications. They produce and distribute reserve power and motive power batteries, battery charges, power machines, battery accessories, and outdoor equipment enclosure solutions to consumers worldwide.
The company reported a net sales of US$340.8 million, down by 0.6% compared to the previous year during the same quarter.
Although the recent pandemic impacted its revenue, the company remained optimistic with a strong cash flow as it exited the second quarter. Here is what EnerSys' CEO said in their press conference:
"We exited our 2nd quarter with a renewed sense of optimism as our incoming order rate approached pre-pandemic levels. COVID-19 adversely impacted our revenue in Q2, but lower costs including commodities led to another quarter of strong cash flow. We generated $217M of operating cash flows in H1. We continue to flex manufacturing capacity to match demand, minimizing manufacturing inefficiency while benefiting from raw material cost reductions. "
6. Johnson Controls, Inc. (NYSE: JCI)
No of HFs: 24
Total Value of HF Holdings: $892 Million
Johnson Controls International PLC is an Irish-owned multinational conglomerate based in Cork, Ireland, which manufactures fire, HVAC, and building safety equipment. They recently announced a grant by the United States Department of Energy under the American Recovery and Reinvestment Act (ARRA) to build domestic manufacturing capacity for advanced batteries for hybrid and electric vehicles.
Diamond Hill Capital talked about JCI in its 2020 Q1 investor letter. Here is what they said:
Diversified technology and industrial company Johnson Controls International company Johnson Controls Internaional PLC underperformed after reporting disappointing quarterly results. We continue to believe the stock is trading at a significant discount to our estimate of intrinsic value and that the new management team has an attractive opportunity to grow that intristic value over time through continue operational improvements and shrewd capital allocation.
The stock's top hedge fund holder is Ken Griffin's Citadel Investment Group which had more than US$241 million invested in the stock at the end of September. Coming in second is Harris Associates with more than US$237 Million.
Johnson Controls for the quarter ending in September 2020 generated US$5.954B in revenue, a 5.1% decline year-on-year. For the twelve months ending September, revenue was US$22.317B, a 6.8% decline year on year.
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Please also see 30 Most Popular Stocks Among Hedge Funds: 2020 Q3 Rankings
Disclosure: No positions. Top 11 Lithium and Battery Stocks to Buy Now is originally published at Insider Monkey.