Historically, the two metals that were seen as symbolizing wealth were gold and silver. In the present age, however, all talk seems to be about a different, and far more promising precious metal. This of course is a reference to lithium, the material which lies at the heart of technological innovation. The metal finds most of its demand, given its use in the production of high-storage batteries, putting it at the center of EV technology. People like Elon Musk have repeatedly emphasized that its prices are on the verge of an explosion, given that demand far outweighs the available supply.
Given the immense potential of the oncoming wave of lithium demand, it is no surprise that investors have increasingly been showing interest in stocks that hold exposure to the precious metal. The industry as a whole is on the step to a breakthrough. As countries continue to end their reliance on fossil fuels and move towards a self-sufficient energy program, lithium will continue to be the most sought-after commodity in the market. In this spirit, we bring forth a list of the five best lithium stocks to buy, for any investor seeking to expose themselves to this dynamic growth opportunity.
The first stock on our list is the extremely promising, China-based lithium company, Ganfeng Lithium (OTC: GNENF). Ganfeng is a company that is fully positioning itself with the anticipation of explosive demand growth for lithium. Through leveraging its strong financial position, the company has been undertaking lucrative acquisitions to capitalize on the booming opportunities.
Recently, Ganfeng announced its plans to acquire the Argentinian lithium miner, Lithea Incorporated. The move comes as a crucial shift for the company, which predominantly operated in the market as a battery manufacturer. It is apparent that GNENF seeks to go all in with the lithium exposure and establish itself as a fully end-to-end lithium company. The move will boost its cost advantage against competitors significantly. The deal entails payment of over $960 million for the acquisition, which is the largest purchase the company has ever incurred as to date.
GNENF can afford such large-scale expansionary initiatives given its top-notch performance in 2021 when the demand for Lithium entered into a rocketing growth phase. Annual revenue in 2021, stood at $1.7 billion, against the prior year’s $842 million. Cash holdings were just as remarkable, as they nearly tripled from $333 million to $996 million, in a mere 12-month period.
Ganfeng’s financial strength, and its vertical expansion, both indicate that the company is fully positioning itself to lead the lithium market and become a key player. All this is especially more compelling when considering that the stock is trading 55% below its price of 12 months ago. For such strong prospects, this indicates an incredible bargain that no one must miss out on and places Ganfeng on our best lithium stocks to buy list.
Lithium Americas Corporation
Moving on, we turn our sights to an emerging Canadian star, Lithium Americas Corporation (NYSE: LAC). This is an extremely promising company that is very likely to stand alongside lithium giants in the near future. LAC is poised to benefit exceptionally well, as a result of the surging demand for lithium-ion, by EV manufacturers.
What is most interesting about LAC is its pre-revenue status, which means the company is yet to initiate commercial activity in the market. Despite this, it has immense promise, given its share price rise by over 80% in 12 months, at a time when the wider S&P 500 dipped by nearly 5%.
Currently, LAC has four core asset sites that are under development, with three based in South America, and one in the US state of Nevada. This strategic positioning reflects immense growth potential for the stock. LAC could very well become a lithium leader in the Western hemisphere, supplying to both US and Canadian markets. Analysts expect revenue in the final quarter of 2022, with a constant income stream to fully initiate by next year. Lithium Americas represents perhaps the best first movers advantage opportunity for those looking to go big in the world of lithium and are looking at lithium stocks to buy.
Up next on number three of our list is a story of a company with strong fundamentals, focused management, and broader tailwinds of increased lithium demand. This, of course, is none other than EnerSys (NYSE: ENS). EnerSys, which reported its 2022 year-end results on March saw top-line growth of almost 13%. Moreover, ENS share price has surged by 25% in just the last month alone, indicating strong demand for the stock. This is motivated by strengthening fundamentals, as well as the management’s commitment to share buybacks, which continue through the first quarter of 2023.
Moreover, the company is one of the few in the lithium space that pays out dividends to its shareholders and attracts other investors who are looking at lithium stocks to buy. Although the yield is a modest 1%, it shows the ENS management’s plans of turning in value to shareholders. This yield will continue to decline, as the company has maintained a dividend of 70 cents per share since 2015. The reason is its growth-oriented nature, and its present need for expansion to better see exposure to booming lithium demand.
Given the wider supply chain headwinds of 2022, EnerSys did face its fair share of liquidity problems, due to which it had increased its long-term debt. Despite this, however, it holds cash worth $400 million, which is sufficient, considering its scale of operations, and inventory worth $715 million to keep its commercial activity running smooth. In terms of its fundamentals alone, ENS stands as a clear winner to opt for.
The fourth lithium stock we present is Livent Corporation (NYSE: LTHM). This is a stock that is aggressively aiming to achieve rapid growth and eventually dominate the lithium market through strategic initiatives. Quant ratings put Livent at number 1 in the entire lithium industry, given its strengths and capabilities, making it a favorable lithium stock to buy.
The company serves a wide array of customers that demand different lithium products. These include heavy industry components, lithium-based agricultural chemicals, as well as aerospace equipment. Given the surging demand for its products, by June 2022, Livent more than doubled its quarterly revenue figure, on a year-on-year basis, with the figure rising from $102 million to $218 million.
LTHM climbed by nearly 60% in the last month alone, reflecting investor interest in the lithium industry’s leading player. The company has leveraged strong lithium demand, which has resulted in robust cash flows and high margins, to boost its carbonate and hydroxide segments’ production capacities. Given this aggressive growth strategy, the management remains confident that by 2030, it would have increased lithium production by 400%.
Such growth is boosted by a critical competitive advantage, which makes it highly difficult to dethrone this lithium kingpin. Livent has a strong business presence in Argentina, spanning at least two decades. These sites the company holds allow for some of the lowest-cost lithium extraction, making the company highly competitive. All of these factors collectively have been responsible for driving up LTHM prices and will continue to do so as the company continues to expand its business.
Alpha Lithium Corporation
The final stock on our list of lithium stocks to buy is Alpha Lithium Corporation (OTC: APHLF). Alpha Lithium is a small company, but one that holds a significant competitive advantage over many of its much larger peers. The company focuses its strategic asset acquisition in Salar, Argentina, a zone that is typically referred to as the Lithium Triangle. It also is one of the largest lithium producers in the Lithium-rich Hombre Muerto zone within Argentina.
Although APHLF is a small player in the lithium industry, its strategic positioning in these areas gives it a tremendous edge. For one, the infrastructure has already been established within the region decades ago, by giants such as Livent Corporation. This allows Alpha Lithium to engage in large-scale production, despite its small size. As a result of these conditions, the company is expected to undertake a rocketing growth trajectory in the near future. In just the last 12 months, APHLF has more than doubled its share price, from trading at $0.48 to a price of above $1. This is impressive considering that the wider market has been experiencing a bearish slump. This comes at a point before the company has reported any revenue at all. Once APHLF starts seeing free cash flow, its growth prospects will be further boosted.
The Lithium industry is one that presents immense opportunity, given the value, the commodity offers to a number of battery storage sectors. The electric vehicle industry is perhaps the core driver of lithium demand within this decade. As the world continues its transition to eco-friendly domains, the EV industry sees significant propping up. The result is surging prices for Lithium, already impacted by global inflation levels. These conditions make Lithium an ideal growth industry to consider for any investor and compel him to buy lithium stocks.