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Top Performing Lithium Stocks

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Top Performing Lithium Stocks
Photo :Fahroni / istockphoto

In recent years, Wall Street has been closely watching electric vehicle (EV) stocks due to the global auto market’s shift away from traditional internal combustion engines. One critical element in EV batteries is lithium, which is expected to experience a significant surge in demand from the auto industry over time.

Photo :Fahroni / istockphoto

Although the price of lithium reached record highs in late 2022, it experienced a notable decline in early 2023. As a result, companies involved in mining, refining, and battery production with lithium were also impacted, witnessing fluctuations in their stock prices. These lithium stocks are likely to remain volatile as supply and demand dynamics evolve in the future. Nonetheless, long-term investors may view them as a compelling opportunity within the next-generation auto industry.

To identify promising lithium stocks, we have compiled a list of profitable companies with well-established track records and optimistic ratings from Wall Street analysts. Our selection process included factors such as analyst consensus, market capitalization, and projected profitability, among others. These criteria helped us present a curated list of lithium stocks with great potential in the market.

Compare the best lithium companies

COMPANYSECTORMARKET CAPYTD PERFORMANCE
Albemarle (ALB)Materials$26 billion7%
Sociedad Quimica y Minera de Chile (SQM)Materials$20.6 billion0%
Livent Corp. (LTHM)Materials$5 billion49%
Lithium Americas Corp. (LAC)Materials$3.2 billion14%
EnerSys (ENS)Industrials$4.4 billion49%

Methodology

The best lithium stocks on the U.S. stock exchange have certain criteria that set them apart from others. Firstly, they must have a consensus analyst recommendation of “buy” or better, indicating a positive outlook for the stock’s performance compared to the overall market. This is often backed by a high number of analyst “buy” ratings.

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Another crucial factor is their market capitalization, which should be at least $2 billion. Stocks with lower market caps are considered small or microcap stocks and are generally more volatile and risky. On the other hand, stocks with market caps above $1 billion tend to receive more media coverage and have better trading liquidity.

Profitability projection for the next fiscal year is also taken into account. Each stock in the list has a positive forward earnings multiple, indicating analysts’ expectations of positive earnings per share in the coming fiscal year. This is important as profitable companies are generally more resilient during economic downturns and credit market fluctuations.

One notable inclusion in the list is the Global X Lithium & Battery Tech ETF (LIT) holding. LIT is the largest and most liquid lithium stock fund trading on the U.S. market. The ETF invests in various public companies involved in the entire lithium cycle, including mining, refinement, and battery production. All the stocks on this list are part of LIT’s portfolio, which comprises over 40 different stock holdings.

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Why other stocks didn’t make the cut

The lithium space poses various risks for investors, encompassing factors such as companies with high-cost resources, unproven or undeveloped properties, and stocks with unfavorable business fundamentals, like significant debt or unprofitable mines.

Furthermore, investing in lithium stocks with operations in geopolitically unstable regions can introduce substantial risks. Additionally, some lithium stocks are not listed on major U.S. exchanges, which might lead to issues with liquidity and limited access for investors.

It’s important to be cautious with junior mining stocks, given their history of fraud and deception. The infamous Bre-X gold mining scandal in the 1990s serves as a reminder of such risks. Therefore, investors interested in lithium mining stocks should either possess a thorough understanding of the mining business or opt for stocks with comprehensive coverage from qualified analysts.

Final verdict

In late 2022, lithium prices experienced a decline from their peak levels, but industry experts are optimistic about the long-term demand for lithium due to the global shift from internal combustion engine (ICE) vehicles to electric vehicles (EVs). This transition is expected to be a significant driving force for lithium demand in the coming years.

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One of the main factors contributing to the growth of lithium demand is the electrification trend, with EV manufacturers being at the forefront of investors’ minds. The industry is projected to achieve an impressive 35% annual growth rate over the next decade. It is worth noting that the fundamental chemistry for batteries is likely to remain centered around lithium.

Interestingly, investment in EV battery materials, such as lithium, may even outpace the growth rate of EV sales themselves. This reflects the increasing focus on securing the necessary materials to support the rapid expansion of the EV market.

In light of the rising demand for lithium and the promising prospects for EVs, investors are seeking opportunities in lithium stocks. One standout option is Livent Corp., which stands out due to its historical performance, strong earning power, attractive valuation, and reasonable risk level.

What are lithium stocks?

Lithium stocks are essentially shares of companies operating in the lithium market. These companies can include lithium mining firms, lithium refining companies, and lithium-ion battery producers. The demand for lithium stocks has seen a significant surge due to the promising growth prospects of electric vehicles (EVs), as lithium is a crucial component in their batteries.

Lithium stocks are essentially shares of companies operating in the lithium market. These companies can include lithium mining firms, lithium refining companies, and lithium-ion battery producers. The demand for lithium stocks has seen a significant surge due to the promising growth prospects of electric vehicles (EVs), as lithium is a crucial component in their batteries.