In this article, we discuss the 10 cheap lithium and battery stocks to invest in. If you want to skip our detailed analysis of these stocks, go directly to the 5 Cheap Lithium and Battery Stocks to Invest In.
Lithium demand has skyrocketed, along with prices, as the metal becomes central to electric vehicle (EV) production across the world. Lithium is used in batteries that power EVs. The US Geological Survey estimates that over 70% of the lithium produced across the world is now used in EV batteries. According to a report by Mordor Intelligence, an analytics firm, the lithium market size was 280 kilotons in 2020 and expected to grow at a compound annual growth rate of 10% in the next five years with Asia-Pacific dominating consumption.
Electric vehicle manufacturers like Tesla, Inc. (NASDAQ:TSLA), Ford Motor Company (NYSE:F), and XPeng Inc. (NYSE:XPEV) have all been working on in-house development of EV batteries which require a lot of lithium. EV demand is driving lithium forward as well. Fast Markets, a commodity price reporting agency, has predicted that EV penetration will reach 25% by 2025 and rise to 35% by 2030. During this period, energy storage, 5G devices, and Internet-of-Things (IoT) infrastructure, all of which require lithium batteries, will also grow.
Our Methodology
The companies that are trading at relatively cheap prices compared to their growth potential, were selected for the list. The real-time share prices of the stocks, as of December 14, are mentioned alongside other details for further clarity.
In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks were also considered. Hedge fund sentiment was included as a classifier as well.
The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Photo by Mika Baumeister on Unsplash
Cheap Lithium and Battery Stocks to Invest In
10. Piedmont Lithium Inc. (NASDAQ:PLL)
Number of Hedge Fund Holders: 6
Real-Time Share Price as of December 14: $57.53
Piedmont Lithium Inc. (NASDAQ:PLL) explores and develops research projects. In late August, the firm had revealed that it had completed the purchase of North American Lithium as part of a plan to create a lithium production hub in Quebec.
In early October, Loop Capital analyst Christopher Kapsch raised the price target on Piedmont Lithium Inc. (NASDAQ:PLL) stock to $108 from $86 and kept a Buy rating, citing acceleration of demand growth as one of the reasons behind the bullish outlook.
At the end of the third quarter of 2021, 6 hedge funds in the database of Insider Monkey held stakes worth $16 million in Piedmont Lithium Inc. (NASDAQ:PLL), compared to 8 in the preceding quarter worth $38 million.
Just like Tesla, Inc. (NASDAQ:TSLA), Ford Motor Company (NYSE:F), and XPeng Inc. (NYSE:XPEV), Piedmont Lithium Inc. (NASDAQ:PLL) is one of the stocks on the radar of growth investors.
9. Sociedad Química y Minera de Chile S.A. (NYSE:SQM)
Number of Hedge Fund Holders: 26
Real-Time Share Price as of December 14: $55.66
Sociedad Química y Minera de Chile S.A. (NYSE:SQM) produces and distributes lithium products. The company has a decent dividend history and declared a quarterly dividend of $0.3144 per share in September.
In earnings results for the third quarter, posted on November 18, Sociedad Química y Minera de Chile S.A. (NYSE:SQM) reported a revenue of $661 million, up more than 61% compared to the revenue over the same period last year.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Millennium Management is a leading shareholder in Sociedad Química y Minera de Chile S.A. (NYSE:SQM) with 862,036 shares worth more than $46 million.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Sociedad Química y Minera de Chile S.A. (NYSE:SQM) was one of them. Here is what the fund said:
“Among materials names in our structural bucket, we sold SQM as the stock hit our price target. Lithium prices remain at levels well below previous highs and while we expect they may reach higher levels in the future; high pricing likely encourages additional supply onto the market.”
8. Lithium Americas Corp. (NYSE:LAC)
Number of Hedge Fund Holders: 12
Real-Time Share Price as of December 14: $31.36
Lithium Americas Corp. (NYSE:LAC) operates as a lithium resource firm. The stock has rallied in recent weeks as the prices of lithium soar, primarily amid increased EV demand in North America, Europe, and China.
On November 17, Lithium Americas Corp. (NYSE:LAC) announced that it had signed a deal to acquire Millennial Lithium, another lithium property developer, for $400 million as part of a plan to expand into more regions.
Among the hedge funds being tracked by Insider Monkey, Singapore-based investment firm Himension Capital is a leading shareholder in Lithium Americas Corp. (NYSE:LAC) with 2.2 million shares worth more than $50 million.
In its Q1 2021 investor letter, Massif Capital, an asset management firm, highlighted a few stocks and Lithium Americas Corp. (NYSE:LAC) was one of them. Here is what the fund said:
“Lithium Americas: The volatility noted above in LAC has resulted in solid returns via our options trades around our core equity position. At the current time, we are short calls on LAC, as we have done multiple times throughout the position’s life, expiring on May 21, 2021, at a $17.5 and $22.5 strike price. The volume of contracts sold at each strike corresponds to the size of the equity position we want should the calls expire in the money, and the underlying equity gets called away from us. The thought process behind this trade construction is that if we know the size of the position we want at a particular price point, there is no reason not to accumulate additional returns by pre-selling the stock we would have sold anyway.
High levels of volatility positively impact the price of options, increasing the premium we can earn from selling covered calls. To date, we have sold covered calls on LAC that have expired worthless four times, yielding a roughly 7% return on the equity position’s current value or 71bps for the portfolio overall. The outstanding covered calls appear to be trending towards a similar worthless expiration. If they do, the covered call trades on LAC will result in us owning the shares with committed capital of -$0.28 per share.
Although we believe in the fullness of time LAC warrants a $30+ valuation, the prices achieved in early January of this year were not justified by the underlying fundamentals. Some will argue we should have sold down our position. We had already established our option positions and believe LAC is an emerging major in the lithium mining industry. Thus, we decided to maintain the position unchanged. Although still relatively high, the current $15 per share valuation is not crazy compared to where we think the firm should be trading based on fundamentals, so we are no longer overly concerned with the position as is.
LAC management also took advantage of the volatility issuing stock on January 22 for $22 a share. The ~$400 million in proceeds will be used to develop Thacker Pass, the US-based clay lithium deposit, which will likely be the largest producing Lithium mine in America when turned on. In our opinion, the stock issuance could not have come at a better time. LAC management has advanced the project through various development stages (de-risking), but with the share issuance, they have significantly reduced the need to bring in an outside partner to develop the asset as the first phase of the project is expected to cost roughly $581 million. After-tax and at an 8% discount rate, the Thacker Pass project’s present value is approximately $2.6 billion (the firm’s current market capitalization is $1.5 billion). Although the share issuance was dilutive, increasing the total shares by 17%, we believe it will, in the long run, prove a forward-looking, value-additive decision by management.
The lithium market remains an area of interest and focus for us. This reflects our belief that the most exciting investment opportunities to capture secular trends in EV’s and batteries are found upstream in the mining industry. It is also a reflection that there is a greater diversity of lithium investment opportunities relative to other battery metals.”
7. Livent Corporation (NYSE:LTHM)
Number of Hedge Fund Holders: 27
Real-Time Share Price as of December 14: $27.02
Livent Corporation (NYSE: LTHM) makes and sells lithium compounds. The company operates around the world and offers lithium compounds for specific requirements, including for electric vehicle batteries.
Livent Corporation (NYSE: LTHM) recently posted earnings for the third quarter, reporting a revenue of $103 million, up 42% compared to the revenue over the same period last year and beating estimates by $7.6 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Joho Capital is a leading shareholder in Livent Corporation (NYSE:LTHM) with 4.2 million shares worth more than $98 million.
6. QuantumScape Corporation (NYSE:QS)
Number of Hedge Fund Holders: 25
Real-Time Share Price as of December 14: $23.60
QuantumScape Corporation (NYSE:QS) markets solid state lithium batteries. The firm stands to benefit as the US government starts to unroll massive spending under an infrastructure plan that aims to make American manufacturers more competitive in international markets.
On November 8, QuantumScape Corporation (NYSE:QS) announced that it had secured a 10-year lease for three new production facilities to expand the San Jose campus in the next step towards mass manufacturing.
At the end of the third quarter of 2021, 25 hedge funds in the database of Insider Monkey held stakes worth $197 million in QuantumScape Corporation (NYSE:QS), compared to 26 in the preceding quarter worth $321 million.
Along with Tesla, Inc. (NASDAQ:TSLA), Ford Motor Company (NYSE:F), and XPeng Inc. (NYSE:XPEV), QuantumScape Corporation (NYSE:QS) is one of the stocks attracting the attention of institutional investors.
In its Q1 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and QuantumScape Corporation (NYSE:QS) was one of them. Here is what the fund said:
“QuantumScape Corporation is an early-stage developer of solid-state battery technology for electric vehicles aimed at improving key aspects of batteries, including safety, charging times, energy density, and cost. The company went public via a SPAC in November. After rapid appreciation, the stock came under pressure when the company raised additional capital to help accelerate its commercialization process. We exited our small position, as described below.
We sold QuantumScape Corporation, an early-stage solid-state electric vehicle battery innovator, because it was an undersized position with an ambitious valuation. We will continue to monitor QuantumScape’s developments and may revisit the company as an investment at a future point in time.“
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Disclosure. None. 10 Cheap Lithium and Battery Stocks to Invest In is originally published on Insider Monkey.
