Today’s focus for many electric vehicle (EV) investors is on lithium battery stocks. There’s been a tremendous amount of discussion around lithium being the “new oil” that will power the economy moving forward. And today, Elon Musk is echoing that sentiment with a tweet.
The amount of lithium that will be needed to electrify the economy is a key secular driver of many lithium battery stocks. Whether it’s Lithium Americas (NYSE:LAC), Livent (NYSE:LTHM) or Sociedad Quimica (NYSE:SQM), investors have seen some strong performance, relative to the market, for this year and in years prior.
Lithium ion batteries remain among the most efficient batteries. They are used in everything from EV development to smartphones and other consumer electronics we use every day. Accordingly, lithium battery stocks are the intermediaries needed for future economic growth to occur.
Let’s dive into what investors should make of this discussion right now.
Time to Buy Lithium Battery Stocks?
Elon Musk’s assertion that lithium represents the “new oil” that will provide energy independence over the long term is notable. This isn’t a fresh idea. Indeed, analysts from Morgan Stanley recently put out a note stating this thesis.
Now, some EV bulls suggest that lithium is very different from oil. While both resources are non-renewable, lithium can be recycled. Additionally, carbon emissions at the source are eliminated (though there are some carbon emissions from mining).
Additionally, given the concerns around energy security of late, the focus on lithium production may heat up. As President Joe Biden makes his trip to the Middle East, investors will be focused on this issue more than usual. For investors in lithium battery stocks, this could provide a nice short-term catalyst.
Overall, I think this is a sector that provides sustainable long-term secular growth upside. The question is what the right price for these stocks are in this environment.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
