Investing in Lithium, a Key Component of Green Energy

Equities and ETFs are investment options

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Nov 02, 2021
Summary
  • Lithium is a necessary part of batteries for electric vehicles.
  • This metal could be essential in lowering carbon emissions.
  • Companies and ETFs connected to lithium offer growth potential.
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Electric vehicles are shaping up to be an essential piece of the climate change puzzle. Hybrids and EVs are popping up in showrooms and advertizing, promising power and performance without carbon emissions.

EVs could be the latest disruptive force in the status quo, and those investing in the technology and its parts stand to profit financially as well as environmentally.

One potential way to capitalize on EV technology is to invest in a material that’s currently a must for electric cars - lithium. The batteries that make electric vehicles possible contain lithium, and right now, there isn’t a substitute for it.

The Marketplace podcast “How We Survive” takes on the topic of lithium mining as part of increasing electrification of travel through battery technology, calling the metal “white gold.” Lithium mining does carry with it some controversy over the environmental impact of mining operations.

Lithium isn’t scarce, but because it's an integral part of EV technology, it could represent a fast lane for portfolio growth. As there’s no futures market for lithium, investors can rev up their lithium holdings by investing in companies that mine lithium or manufacture EV batteries, or in lithium and battery ETFs.

Like in other market sectors, exchange-traded funds offer less risk and a broader exposure than stocks in single companies. The price-earnings ratios for some of these investment options are high, likely due to increased demand for lithium and share prices that are at or near 52-week highs. This means those interested in investing may want to look for dips or hold the opinion that these share prices will go higher than they are right now.

Listed below are a few options for long-term investors who are interested in the lithium market and want to do further research on which companies and/or ETFs in the industry could be worth adding to their portfolios.

Global X Lithium & Battery Tech ETF

The Global X Lithium & Battery Tech ETF (

LIT, Financial) tracks a market-weighted index of global lithium miners and battery manufacturers. While it offers broad exposure to the sector, its price-earnings ratio is 45.10, which could indicate that it’s overvalued right now.

Livent

Livent Corp. (

LTHM, Financial) produces performance lithium compounds, including battery-grade lithium hydroxide. It is also nearing its high for the past 52 weeks, but as a pure lithium play, the market could assign it higher multiples due to growth expectations.

Albemarle

Albemarle Corp. (

ALB, Financial), a chemical manufacturer, includes a lithium segment that develops and manufactures lithium compounds. It has a price-earnings ratio of 40.61, and it is trading closer to its highs for the year.

Amplify Lithium & Battery Technology ETF

The Amplify Lithium & Battery Technology ETF (

BATT, Financial) is a market-weighted index of advanced battery materials companies such as those that mine or produce lithium, cobalt, manganese, graphite or nickel. It is trading at its highest point in a year.

Lithium Americas

Lithium Americas Corp.'s (

LAC, Financial) focus is on lithium development projects, including the Cauchari-Olaroz Mine in Argentina and the Thacker Pass project in Nevada. Livent has also made a $400 million offer for Millennial Lithium Corp (MLNLF, Financial).

Disclosures

I am/ we are currently short the stocks mentioned. Click for the complete disclosure
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