Lithium is a highly reactive silver/white-colored soft metal. Due to its unique attributes, it has several uses in nuclear fusion applications, ceramics, lubricants, mood stabilizers, cell phone batteries, and others. However, what makes lithium stocks red-hot at this time is the use of the metal in the production of electric vehicle batteries.
Demand for EVs is rising rapidly, pushing global lithium demand from 47,300 metric tons this year to 117,400 metric tons in 2024. Annual production of EVs is expected to rise from 3.4 million vehicles this year to 12.7 million in 2024.
Though currently, only one-third of all lithium produced is attributable to EVs, that figure should rise in the coming years.
Let’s look at three of the best lithium stocks that represent the cream of the crop:
Lithium Stocks: FMC (FMC)
FMC is a chemical company that sells crop management products in the agriculture and industrial markets worldwide. The company spun off its lithium business segment into Livent Corporation (NYSE:LTHM) in 2018.
Livent is a pure-play lithium technology company that has one of the broadest product portfolios in the industry. Though Livent operates separately, its chairman is currently the CEO of FMC. Despite the disruptions in its supply chain, FMC stock’s 12-month return was a healthy 18%.
FMC has been doing well on the earning side, with a solid track record in the past three years. It recently posted its better-than-expected third-quarter results, which comfortably surpassed analyst estimates. Diversification across global regions is helping the company in increasing sales. It has also raised its 2020 earnings per share estimates by at least 6%.
Despite the supply-side challenges in the lithium business, Livent recently posted a third-quarter bump in revenues from the previous quarter. Therefore, both companies are doing exceedingly well and can take advantage of the tailwinds in the lithium industry.
Albemarle (ALB)
Albemarle is a specialty chemicals company that has one of the most diversified product portfolios in the industry. It has three main business segments, which include lithium, bromine and refining catalysts. Despite the Covid-19 led market slowdown, ALB stock’s 12-month return relative to the S&P 500 is at a whopping 94%.
It’s been a challenging year for the company, especially for its lithium division, due to weaker pricing and supply chain disruptions. However, it has bounced back in the second and third quarters, beating analyst estimates by a fair bit. Revenues in its lithium business are expected to recover by mid-2021.
With the rising EV demand, the company is well positioned as one of the world’s largest producers, making it one of the best lithium stocks to buy.
Sociedad Quimica y Minera de Chile (SQM)
Sociedad Quimica y Minera de Chile SA is a Chilean commodity chemicals company that produces iodine, industrial chemicals, lithium, potassium chloride, and other related chemicals. Established in 1968, the Santiago-based company produces commodities for the pharma, agricultural, and industrial sectors.
With the current conducive environment for commodity producers, SQM stock’s 12-month return is at an impressive 76%.
This year has been tough on the company with the slowdown of markets and supply chain disruptions. Its results have come in significantly weaker-than-expected. However, the margin is narrowing down as we get closer to the post-pandemic world in 2021. SQM expects a massive 30% increase in lithium sales next year.
In the third quarter, it sold roughly 17,600 metric tons of lithium, which represents a 56% year-over-year increase. Such numbers are impressive despite the challenges of the pandemic.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
