In this article, we discuss the 10 best cobalt stocks to buy in 2022. You can skip our detailed analysis of the mining industry and go directly to 5 Best Cobalt Stocks to Buy in 2022.
Cobalt has become an integral part of lithium-ion batteries that power electric vehicles (EVs) and mobile phone batteries. Last year, the price of this precious element increased by 118% as the sale and production of EVs received support from governments. However, the bottleneck in EV production has been the limited supply of lithium-ion batteries. This could pose a challenge for the EV industry as the adoption of EVs is expected to compound annually by 29% until 2030, reflecting a positive outlook for cobalt stocks.
Experts anticipate the industrial demand for cobalt to surpass its production by 2025, as the demand for the metal is expected to compound by 9% annually between 2020 and 2026. According to the US geological survey (UGS), 170,000 metric tonnes of cobalt were produced in 2021. Compared to other abundant metals like copper, manganese, and nickel, cobalt is a rare metal, mainly a by-product of nickel and copper mining.
Most of the cobalt processing facilities are present in China, although the country is not a leading producer. The demand for cobalt is high in China due to its use in semiconductor chips that are installed in consumer electronic devices like mobile phone batteries. China is the biggest producer of EVs and mobile phones in the world. Normally, the battery of an EV requires 9 kilograms of cobalt. On the other hand, mobile phone batteries need 30 grams of cobalt.
Investing in cobalt stocks is a tricky proposition as it’s a challenge to find a firm that is fully focused on the production of cobalt. Furthermore, nearly 71% of cobalt production comes from the Democratic Republic of Congo (DRC), a country that is engulfed by issues related to human rights violations due to internal conflicts, an underdeveloped economy, and hazardous mining practices. This creates high geopolitical and environmental, social, and governance (ESG) risks for investors interested in gaining exposure to cobalt through equities. Some of the notable cobalt stocks that investors appear to be bullish on are Carpenter Technology Corporation (NYSE:CRS), Umicore SA (OTC:UMICY), and Sherritt International Corp. (SG:HRT.SG).
Photo by Ricardo Gomez Angel on Unsplash
Our Methodology:
With this context in mind, let’s begin our list of the 10 best cobalt stocks to buy in 2022. These stocks have been picked following an analysis of the company’s growth prospects, production plans, and financial indicators. The hedge fund data discussed is based on the 924 hedge funds being tracked by Insider Monkey at the end of Q4 2021.
10. Glencore plc (OTC:GLNCY) is the world’s biggest producer of cobalt as it achieved annual production of 25,320 metric tons in 2021 through its mines in Australia, Canada, DRC, and Norway. This is equivalent to 16% of global production. The Baar, Switzerland-based company anticipates growth in production as a by-product of the Katanga and Mutanda copper mines. Glencore plc (OTC:GLNCY) is also considering expanding its operations in the nickel supply chain by partnering with Electra Battery Materials, Talon Metals, and the Government of Ontario. Glencore plc (OTC:GLNCY) is looking into the feasibility of establishing a nickel sulfate battery materials facility close to Electra’s cobalt refinery and recycling plant.
Moreover, Glencore plc (OTC:GLNCY) announced a new agreement with Li-Cycle Holdings Corp. (NYSE: LICY) in May 2022. The strategic partnership would make Li-Cycle the company’s preferred partner in the lithium-ion battery recycling sector. Glencore plc (OTC:GLNCY) is expected to subscribe for a convertible debt of $200 million in Li-Cycle. If the option is exercised, the firm will hold a 10% stake in Li-Cycle Holdings Corp. (NYSE: LICY).
During Q1 2022, Dan Loeb’s Third Point LLC initiated a position in Glencore plc (OTC:GLNCY). Furthermore, General Motors Company (NYSE:GM) also signed a deal to buy cobalt from Glencore plc (OTC:GLNCY) in April 2022 to use in its EVs.
9. China Molybdenum Co., Ltd. (HKSE:3993.HK) produced 14,800 metric tons of cobalt in 2021. CMOC is a partially state-owned enterprise with an 80% interest in the Tenke Fugurume mine in DRC. The China-based company plans to invest $2.5 billion to double its output of copper and cobalt from the Tenke Fungurume mine.
In 2021, China Molybdenum Co., Ltd.’s (HKSE:3993.HK) revenue increased by 53.9% YoY to $27.32 billion. Meanwhile, earnings rocketed by 119% YoY to $803 million. China Molybdenum Co., Ltd. (HKSE:3993.HK) is the biggest producer of cobalt in China and one of the most widely known cobalt stocks listed on the Shanghai and Hong Kong stock exchanges. As of May 18, the company has a market capitalization of $107.2 billion, and its dividend yield stands at 2.26%.
8. Vale S.A. (NYSE:VALE) produced 2,523 metric tons of cobalt in 2021, reflecting a 6% increase in production YoY. Vale S.A. (NYSE:VALE) produced 751 metric tons at the Port Colborne refinery and the remaining 1,772 metric tons at Long Harbor Refinery. The cobalt produced has a purity level of 99.8%, which is in line with the contract criteria for the London Mercantile Exchange (LME).
The Brazil-based mining giant produces cobalt as a by-product from its two mines in Canada located in Sudbury and Voisey’s Bay. The mine at Sodbury has been operating since 1885, and Vale S.A. (NYSE:VALE) anticipates it to be completely exhausted by 2043. Meanwhile, the Voisey’s Bay reserve became operational in 2005 and will be completely exhausted in 2034.
For Q1 2022, Vale S.A. (NYSE:VALE) posted a net income of $4.5 billion and an adjusted EBITDA of $6.4 billion. The company also shared that it had started the construction work on Tecnored’s first commercial plant. The plant is expected to have an initial capacity of 250 ktpy of green pig iron and might be expanded to 500 ktpy later. Vale S.A. (NYSE:VALE) has estimated the investment to be worth around R$ 1.6 billion.
Moreover, the company also secured a multi-year agreement in March with Northvolt AB to supply low-carbon nickel products. Vale S.A. (NYSE:VALE) stated that the deal represents the company’s continued commitment to sustainability and its goal of becoming the leading supplier choice in the electric vehicle industry.
Miller Value Partners Income Strategy mentioned Vale S.A. (NYSE:VALE) in its Q1 2022 investor letter. Here’s what the investment management firm said:
“Vale SA (NYSE:VALE) was the top contributor for the quarter, gaining 48.1%. Vale reported full-year 2021 (FY21) revenues of $54.5 billion, up 37.8% year over year (Y/Y), and adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $31.2 billion, up 87.8% Y/Y. Vale paid out $13.5 billion in dividends and repurchased $5.5 billion in common stock, representing $19.0 billion in capital returned to shareholders in 2021, or ~20.1% of the company’s market cap. The company’s base metals segment improved in 4Q21, with nickel production increasing 59% from 3Q21 to 48.0 thousand tonnes (KT) and copper production increasing 12% from 3Q21 to 77.5 kt. Increased electric vehicle (EV) production is expected to serve as a significant tailwind for this segment, as both metals are integral components of the EV battery manufacturing process, with management citing an expected compound annual growth rate from 2019-2031 of 29.9% and 20.6% in EV-driven demand for nickel and copper, respectively.”
According to Insider Monkey’s proprietary data, 25 hedge funds held a stake in Vale S.A. (NYSE:VALE) at the end of Q4 2021. Fisher Asset Management is the leading hedge investor in Vale S.A. (NYSE:VALE), with a stake worth $573.5 million.
7. Zhejiang Huayou Cobalt Co., Ltd (SSE:603799.SS) is another Chinese cobalt producer on our list of 10 best cobalt stocks to buy in 2022. Zhejiang Huayou Cobalt Co., Ltd (SSE:603799.SS) has an annual cobalt production of 5,390 metric tons. The Zhejiang, China-based company is a provider of metal production and processing services and is involved in the research, development, and manufacturing of cobalt-related products and lithium battery materials.
The stock price of Zhejiang Huayou Cobalt Co., Ltd (SSE:603799.SS) has experienced an increase of over 19% in the last year as opposed to the 12.34% decline experienced by the SSE Composite Index during the same period. Moreover, even the S&P 500 Index has experienced a correction of 2.76% in the last year. The company was placed 5th on the Zhejiang Stock Market Value List for 2021.
6. Wheaton Precious Metals Corp. (NYSE:WPM) is a Canadian metals streaming company that has agreements with 23 operating mines and 13 mines that are in the development stage.
In a note issued to investors on April 21, Matthew Murphy at Barclays maintained an Equal Weight rating on Wheaton Precious Metals Corp. (NYSE:WPM) stock but increased the target price from $45 to $49.
On May 5, the company reported revenue of $305 million and an operating cash flow of $210 million for Q1 2022. Wheaton Precious Metals Corp.’s (NYSE:WPM) net cash balance stands at $376 million as of March 31. CEO Randy Smallwood shared that the company had a strong start to the year with the addition of two new streams and the adoption of a climate change policy to meet the goal of zero carbon emissions by 2050. Moreover, Wheaton Precious Metals Corp. (NYSE:WPM) declared a cash dividend of $0.15 for Q2 2022, reflecting an increase of 7% YoY. The dividend will be distributed on June 3.
Out of the 924 hedge funds covered by Insider Monkey as of Q4 2021, 24 hedge funds held a stake in Wheaton Precious Metals Corp. (NYSE:WPM), with a combined value of $490.7 million. Amongst the hedge funds, Jean-Marie Eveillard’s First Eagle Investment Management is the biggest investor in Wheaton Precious Metals Corp. (NYSE:WPM).
In addition to Wheaton Precious Metals Corp. (NYSE:WPM), some other notable cobalt stocks on the list are Carpenter Technology Corporation (NYSE:CRS), Umicore SA (OTC:UMICY), and Sherritt International Corp. (SG:HRT.SG).
Click to continue reading and see 5 Best Cobalt Stocks to Buy in 2022.
Suggested Articles:
- 10 Best Undervalued Small-Cap Stocks According to Hedge Funds
- 10 Best Undervalued Large-Cap Stocks According to Hedge Funds
- 10 Value Stocks to Buy According to Joel Greenblatt
Disclose. None. 10 Best Cobalt Stocks to Buy in 2022 is originally published on Insider Monkey.
