We recently compiled a list of the 12 Biggest Lithium Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Rio Tinto Group (NYSE:RIO) stands against the other lithium stocks.
Lithium is a soft, silver-white alkali metal that has become a cornerstone of the clean revolution. Its commonly used form, lithium carbonate, is required for the production of lithium-ion batteries. These power a variety of technologies, including vast renewable energy storage systems and electric vehicles (EV), making them nearly indispensable in the development of sustainable energy solutions. Although EVs have been available for a while, it wasn’t until recent technology breakthroughs and cost reductions that they became a more reliable option for consumers, resulting in an increase in lithium demand. The International Energy Agency states that the demand for lithium will climb by over 40 times between 2020 and 2040, particularly for use in battery storage and electric cars. As per Fortune Business Insights, the global lithium market achieved a valuation of $22.19 billion in 2023 and is expected to reach $134.02 billion by 2032, reflecting a CAGR of 22.1%.
According to a McKinsey report, the global drive to net-zero will depend on guaranteeing a consistent supply of essential battery raw materials, especially as demand for EVs climbs toward the latter of this decade. Based on the report, the global market for BEV passenger cars is expected to increase sixfold between 2021 and 2030, with yearly sales rising from 4.5 million to almost 28 million units during that time. In addition, such a forecast indicates that the sector is “likely to confront persistent long-term challenges” in line with demand. McKinsey also states that 80% of all lithium mined now is used by battery manufacturers, and by 2030, that number may rise to 95%.
On the other hand, analysts predict increased volatility in lithium carbonate in 2024, following a challenging year in which the metal’s price plunged 22% due to a global supply glut. However, some balance is expected to recover. S&P Global predicts that as production cuts begin to reduce excess supply, lithium surplus would fall to 33,000 metric tons in 2025 from 84,000 metric tons in 2024. According to Chris Berry, president of House Mountain Partners, however, the behavior of the lithium price over the next year may be unpredictable. He said the following:
“Lithium price volatility is a feature of the energy transition and not a bug. You have a small but fast-growing market, opaque pricing, legislation designed to rapidly build critical infrastructure underpinned by lithium and other metals, and this is a recipe for boom-and-bust cycles demonstrated by extremely high and extremely low pricing.”
Our Methodology
For our list of the 12 biggest lithium stocks to buy, we narrowed down companies involved in lithium mining and supply, lithium-ion battery sales, or technologies related to battery operations. The names on this list are ranked in ascending order according to the hedge fund sentiments surrounding them, using data from Insider Monkey’s Q3 2024 database.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of an open pit mine, with workers extracting minerals.
Rio Tinto Group (NYSE:RIO)
Number of Hedge Fund Holders: 30
Rio Tinto Group (NYSE:RIO) is one of the world’s largest mining corporations, known for exploring and extracting a wide variety of mineral resources. The company’s mining portfolio includes minerals such as lithium, aluminum, copper, iron ore, diamonds, gold and molybdenum, among others. Unlike its competitors, Rio Tinto Group (NYSE:RIO) remains committed to lithium production and is one of the only major mining corporations that continues to make significant investments in lithium.
Last December, Rio Tinto Group (NYSE:RIO) announced the approval of $2.5 billion for the expansion of its first commercial-scale lithium operation, the Rincon project in Argentina, to produce 60,000 tonnes of battery-grade lithium carbonate annually. Along with lithium mining, Rio Tinto’s (NYSE:RIO) joint venture with Sumitomo Metal Mining strengthens the company’s position in the gold and copper industries, both of which are critical for EVs, especially as the Winu project progresses.
RBC Capital Markets maintained its Sector Perform rating on Rio Tinto Plc (NYSE: RIO) and a price target of GBP54.00 on January 17. The update followed reports of preliminary discussions between the mining giant and Glencore about a possible merger. However, this came as somewhat of a surprise, given that Glencore had previously contacted Chinalco, Rio Tinto’s largest shareholder, in July 2014 about a possible merger. Since then, both companies had gone on to different trajectories, with Glencore increasing its holdings, while Rio Tinto selling off its coal assets. RBC Capital expressed some doubts about the feasibility of a simple merger, stating that Rio Tinto’s shareholders might see the deal in Glencore’s favor. On the other hand, the firm also suggested that a deal structure could exist that might satisfy both parties’ shareholders.
Overall RIO ranks 4th on our list of the biggest lithium stocks to buy according to hedge funds. While we acknowledge the potential of RIO as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RIO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.