In this article, we discuss the 9 best cobalt stocks to buy now. If you want to skip our detailed analysis of these stocks, go directly to 4 Best Cobalt Stocks to Buy Now.
There has been a massive rise in demand for electric vehicles over the past few years. According to a report by the International Energy Agency, the share of electric car sales in total car sales has more than tripled since 2020, jumping from 4% to above 12% at the end of last year. This shift towards electric vehicles, as well as an emerging reliance on energy storage systems that power homes, has resulted in an increased demand for cobalt, one of the most sought-after transition metals in the world used to develop batteries.
Even though the electric vehicle revolution has been more than a decade in the making, the cobalt supply chain has not grown with it. Firstly, there is the issue of sustainability. Per price reporting agency Fast Markets, EVs have been the primary consumer of cobalt since 2021. Due to volatile pricing though, EV firms have started using lithium iron phosphate (LFP) in battery manufacturing, decreasing their reliance on cobalt. However, due to properties relating to thermal stability and higher energy density, cobalt remains a battery tech behemoth.
In 2022, cobalt demand grew by more than 33% year-on-year, mainly because of a rise in EV demand. In the next ten years, the demand for the metal will register a compound annual growth rate of more than 14%. The growth of the cobalt market has also been held in check because of geographic monopolies. For example, nearly 70% of mined cobalt, used in EV batteries around the world, comes from the African nation of Congo. A conflict in the region has made cobalt prices more volatile in the past few months.
Indonesia is scaling up cobalt mining to merge as a competitor to Congo. By the end of 2033, the Southeast Asian country is expected to contribute towards more than 33% of the total cobalt supply in the world. Besides mining, cobalt processing is also an important part of the supply chain with a monopoly. 70% of cobalt processing plants in the world are based in China. With the global cobalt recycling market still in infancy, logistical problems and shipping disruptions routinely emerge as major headwinds for the industry.
Even though the United States and Europe are working towards cobalt mining and processing facilities, Fast Markets expects the gap between supply and demand to grow in these regions over the coming years. This will result in a reliance on imports to source the needed cobalt for EV battery manufacturing. Battery recycling plants could mitigate some of these import costs, but their overall impact on the cobalt import bill will be minimal. Cobalt surpluses will keep the cost of the key metal below record highs though, experts predict.
Glencore (LSE:GLEN.L), one of the biggest cobalt mining firms in the world, recently released a report outlining how surging supplies of the metal from Africa and Indonesia will create a large surplus in the next few years, keeping the prices of cobalt in check. The company said it would add to cobalt stockpiles and cut production to support prices. In 2022, global cobalt supplies were estimated at around 200,000 metric tons. The surplus metal last year was only around 10,000 metric tons, according to Glencore.
Cobalt prices had registered record highs in May 2022 but have since dropped more than 65% to around $15 per lb. Macquarie analyst Jim Lennon expects the cobalt surplus to grow from 8,600 metric tons in 2023 to more than 10,400 metric tons in 2025. Lennon predicted that new projects in Congo would add more than 50,000 metric tons to the cobalt supply annually in the coming years, with the Chinese mining projects further adding to these numbers. The switch to LFP batteries in Asia is expected to keep the demand of cobalt in check.
Investors eager to benefit from the thriving cobalt market should consider investing in firms like Freeport-McMoRan Inc. (NYSE:FCX), Vale S.A. (NYSE:VALE), and ATI Inc. (NYSE:ATI). Cobalt is expected to play a key role in energy transition away from fossil fuels and looks set to be a long-term growth driver. Michael Shor, the CEO of Haynes International, Inc. (NASDAQ:HAYN), a prominent cobalt firm, recently said during the fourth quarter earnings call that cobalt headwinds were moderating and prices stabilizing.
“Looking at the full fiscal year 2023, we achieved revenue of $590 million with company record revenue shift in the aerospace and industrial gas turbine markets. In addition, we had adjusted gross margins neutral of raw material headwind at 20.7% and net income at $42 million. We talked a lot about this raw material impact, which helped us last year and hurt us this year. Raw material price fluctuations can impact our results more sharply than others in our peer group given our product portfolio being solely high-end nickel and cobalt-based alloys, as reflected in that average selling price of $33 a pound. The raw material impact of falling nickel and cobalt, unfavorably impacted our results by approximately $3.7 million in the fourth quarter.
We estimate that the full fiscal year impact was $12.6 million unfavorable. One thing that is interesting is the headwind is mostly cobalt. The breakdown is a cobalt headwind of $8.1 million of the $12.6 million and nickel was $4.5 million of the $12.6 million. Thankfully, the cobalt headwind is moderating as the cobalt price has stabilized. Moreover, nickel is still falling, thus still causing an increasing headwind. As Mike mentioned, this is concerning. And we are now projecting the impact of this headwind in our first quarter of fiscal ’24 to be well above the $3.7 million pre-tax we saw in Q4 of FY ’23. Looking at the full year FY ’23 raw materials and comparing to FY ’22, we saw a significant swing. We highlighted last year that we had a positive tailwind for the year of $9.4 million favorable.”
Our Methodology
The companies that have interests in the cobalt business were selected for the list and ranked according to hedge fund sentiment. In order to provide readers with some context for their investment choices, the analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2023 was used to identify the number of hedge funds that hold stakes in each firm.
A technician connecting an EV battery to the Grid Integrated Vehicle platform.
Best Cobalt Stocks to Buy Now
9. Haynes International, Inc. (NASDAQ:HAYN)
Number of Hedge Fund Holders: 12
Haynes International, Inc. (NASDAQ:HAYN) is a company that makes and sells nickel and cobalt-based alloys. These are corrosion resistant and are used in jet engines, gas turbines, and industrial heating equipment, among other places. In mid-November, Haynes International, Inc. (NASDAQ:HAYN) posted earnings for the fourth quarter of 2024, reporting earnings per share of $1.02 and a revenue of more than $160 million.
At the end of the third quarter of 2023, 12 hedge funds in the database of Insider Monkey held stakes worth $34 million in Haynes International, Inc. (NASDAQ:HAYN), compared to 10 the preceding quarter worth $36 million.
Just like Freeport-McMoRan Inc. (NYSE:FCX), Vale S.A. (NYSE:VALE), and ATI Inc. (NYSE:ATI), Haynes International, Inc. (NASDAQ:HAYN) is one of the best cobalt stocks to buy now.
In its Q3 2023 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and Haynes International, Inc. (NASDAQ:HAYN) was one of them. Here is what the fund said:
“Haynes International, Inc. (NASDAQ:HAYN) develops and manufactures high-performance super-alloys. Nickel- and cobalt-based alloys play a critical role in high-heat applications, including jet engines, and highly corrosive environments, such as chemical processing. Haynes’ business is poised to capitalize on a beneficial global aerospace market which is generating strong growth.”
8. Materion Corporation (NYSE:MTRN)
Number of Hedge Fund Holders: 16
Materion Corporation (NYSE:MTRN) makes and sells advanced engineering materials. These are used in making semiconductors, as well as in products used by the aerospace and defense industries. On November 2, investment advisory KeyBanc maintained an Overweight rating on Materion Corporation (NYSE:MTRN) stock and raised the price target to $130 from $128, noting the advisory was intrigued by long-term idiosyncratic drivers for the firm.
Among the hedge funds being tracked by Insider Monkey, Illinois-based investment firm Trigran Investments is a leading shareholder in Materion Corporation (NYSE:MTRN) with 675,294 shares worth more than $68 million.
7. Wheaton Precious Metals Corp. (NYSE:WPM)
Number of Hedge Fund Holders: 24
Wheaton Precious Metals Corp. (NYSE:WPM) is a Canadian mining company with prime interests in precious metals deposits. On December 6, Canaccord analyst Carey MacRury maintained a Buy rating on Wheaton Precious Metals Corp. (NYSE:WPM) stock and raised the price target to C$74 from C$67.
At the end of the third quarter of 2023, 24 hedge funds in the database of Insider Monkey held stakes worth $488 million in Wheaton Precious Metals Corp. (NYSE:WPM), compared to 24 in the previous quarter worth $534 million.
6. BHP Group (NYSE:BHP)
Number of Hedge Fund Holders: 25
BHP Group (NYSE:BHP) is an Australian natural resources firm with interests in petroleum, copper, iron, and coal. In late November, investment advisory Bank of America maintained a Buy rating on BHP Group (NYSE:BHP) stock and raised the price target to A$57 from A$51.5, noting that iron ore prices were expected to rise in the coming months.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in BHP Group (NYSE:BHP) with 401,433 shares worth more than $22 million.
5. Rio Tinto Group (NYSE:RIO)
Number of Hedge Fund Holders: 27
Rio Tinto Group (NYSE:RIO) engages in exploring, mining, and processing mineral resources worldwide. On December 12, investment advisory JPMorgan upgraded Rio Tinto Group (NYSE:RIO) stock to Overweight from Neutral and raised the price target to GBP 7,000 from GBP 6,310, noting the updated model reflected 2024 targets for the firm.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Rio Tinto Group (NYSE:RIO) with 15 million shares worth more than $990 million.
In addition to Freeport-McMoRan Inc. (NYSE:FCX), Vale S.A. (NYSE:VALE), and ATI Inc. (NYSE:ATI), Rio Tinto Group (NYSE:RIO) is one of the best cobalt stocks to buy now.
In its Q1 2023 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and Rio Tinto Group (NYSE:RIO) was one of them. Here is what the fund said:
“In terms of geographical performance, the eurozone emerged as the top-performing region, and our stocks did better still, fueled by the strong performance of Infineon, L’Oréal, and Schneider Electric. EMs, which lagged the index, were boosted by the improving outlook for semiconductor companies TSMC and Samsung. Mexico’s FEMSA also contributed strongly to relative returns. Europe ex EMU was the weakest region primarily due to the underperformance of SE Banken and UK miner Rio Tinto Group (NYSE:RIO). The latter was affected by concerns over softer iron ore pricing in the current year, another reflection of manufacturing weakness in steelmaking giant China.”
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Disclose. None. 9 Best Cobalt Stocks to Buy Now is originally published on Insider Monkey.
