The Lithium industry is one that many claims is on the verge of a price explosion. With increasing momentum in the shift towards electric vehicles, the metal continues to see an increase in demand. Analysts point out that demand will continue to outweigh available supply right through 2030. Furthermore, many governments have been actively supporting the push toward electric vehicles. This is due to sky-high rocketing oil prices, and the wider trend towards sustainable practices. These conditions have continued to bring the Lithium industry under the spotlight. This, therefore, presents a ripe opportunity for those looking to add a high-growth class of stock to their overall portfolio. In this article, we present the 5 best stocks of companies situated within the Lithium industry.
Sociedad Quimica y Minera de Chile S.A
We begin our list of top 5 lithium stocks with the stock of the largest publicly traded Chilean company, Sociedad Quimica y Minera de Chile S.A (NYSE: SQM). The company specializes in the low-cost production of fertilizer components such as nitrates, iodine, and most importantly, lithium. Its lithium segment alone delivered 40% of its revenue for the financial period of 2021. This indicates the company’s focus on this high-demand metal, which continues to increase in importance throughout subsequent years.
The increase in lithium prices in the global markets continues to enhance SQM’s earnings by a considerable margin, much to the delight of its shareholders. In the first quarter of 2022, analysts expected a quarterly EPS figure of $1.40. The company crushed this estimate by delivering earnings of $2.80 per share.
We believe these growth prospects of the stock are a major green flag for any investor. Moreover, the diversity in its business segments enhances its financial sustainability through an overall risk reduction. The company also appears to have an appetite for expansion in the Lithium sphere, having recognized its future potential. Whereas its focus had primarily been on lithium carbonate, it has invested in the Mount Holland project in Australia. The move seeks to strengthen the company’s capability to supply lithium hydroxide to the global market.
The second stock on our list of top 5 lithium stocks is the American chemical manufacturer, Albemarle Corporation (NYSE: ALB). From its three business segments of lithium, bromine, and catalysts, ALB’s lithium segment remains the strongest by far. In 2021, revenue from this segment alone accounted for 42% of the company’s total sales volume. This enhances its growth prospects, given the rising demand for the comodity anticipated throughout the next decade. These pricing trends make such a business strategy extremely advantageous to ALB, along with its shareholders.
With facilities in the US, Australia, Germany, Chile, China, and Taiwan, the company truly has a strong geographic presence, which delivers it a substantial supply chain and logistical edge over its competitors. ALB has indicated its ambitions to up its lithium production capacity from 88 kilotons to 200 kilotons by 2025. If investors are looking for a stock of a well-established player in the lithium industry, with a robust balance sheet, there hardly comes a better option than ALB. The company has delivered profits in all of the last 10 years, with a consistent dividend increase since 1992.
Up next, we present the emerging Lithium champion from the USA, Livent Corporation (NYSE: LTHM). Now, you might be wondering what a young company like Livent is doing on our list, that has a market capitalization of a mere $4 billion, and was founded as recent as in 2018. The answer is simple; Cost Leadership. Livent delivers lithium derivatives at relatively low costs in comparison to the wider industry. This adds to the financial sustainability of the company, and points to wider profit margins amidst the increasing lithium pricing trends.
Additionally, Livent also holds the flexibility of producing both derivative products, lithium carbonate as well as lithium hydroxide. For a young market player such as Livent, these attributes collectively point to high growth within the coming years. This growth is evident in the company’s earnings, which have been consecutively accelerating each quarter. In the first quarter of 2022, the company showcased a 56% revenue climb from the prior year’s comparable quarter.This enormous climb have placed the company in top 5 lithium stocks list.
This expansion is further reflected in the company’s broader market strategy, through an increase in its production facilities in the Argentinian region. Livent projects its 20 kiloton annual production capacity to climb up to 100 kilotons by 2030. Investing in the stock now would yield rocketing growth until the company exponentially expands its capacity.
Sigma Lithium Corporation
The fourth stock on our list of top 5 lithium stocks is the Canadian explorer and developer of Lithium deposits, Sigma Lithium Corporation (NASDAQ: SGML). The company is presently working on the development of its Brazilian hard rock lithium deposit, which is one that is truly world-class. The project holds high-grade lithium spodumene with impressive levels of purity.
Sigma Lithium fully owns the project, which has an estimated mineral resource of an impressive 59 megatons. Based on these numbers alone, the site is the largest lithium deposit in the entire Western hemisphere. In the wake of the surging demand, likely to continue rising throughout the next decade and beyond, having full ownership of the project significantly enhances growth potential for the company.
There are a number of additional reasons why we here at Stocks Telegraph feel that Sigma Lithium deserves a spot on this list. For one, the company’s strategic partnership with the Japanese Mitsui and Co. Ltd. delivers it a significant competitive edge over the wider industry. Mitsui would facilitate logistics, global marketing, as well as subsequent mineral development.
Additionally, Sigma Lithium holds a significant financial advantage, which is its low-interest funding of $90 million for stage 1 of its development project. This arrangement significantly enhances the rate of return for shareholders, which could explain the impressive 230% price climb in the last year alone.
Piedmont Lithium Inc
The last stock on our list of top 5 lithium stocks is the US exploration-stage company Piedmont Lithium Inc (NASDAQ: PLL). The company has complete ownership of the Carolina Lithium Project, which exceeds 3100 acres. It also undertook a series of high-potential acquisitions in 2021 of companies that hold lithium assets in North America, Australia as well as in Ghana.
Piedmont has been setting itself up for high growth for the oncoming favorable conditions for the lithium industry. Due to these factors, it is evident that the stock holds immense promise. In addition to the high growth potential PLL holds, there is a unique advantage that is associated with its stock. Its well-timed acquisitions and strategic investments have set the company up as a future Lithium conglomerate following its high growth. By 2023, Piedmont expects robust cashflows from its Ghana and Canada-based subsidiaries. This growth will only accelerate upon successful development of the Carolina Project.
The Lithium industry is one that holds 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 is being significantly propped 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. The stocks mentioned in this article are all well suited to lead the industry forward with the surging demand for the metal, with each holding unique core strengths.