There’s a lot we don’t know about the future of battery stocks. But generally speaking, it is expected that the market will grow at rates somewhere in the mid-to-high teens in annual percentage terms. That suggests that even the more conservative stocks in the EV battery sector should offer handsome rewards over time.
The thought of reasonable growth with minimal downside appeals to the more conservative investor, who avoids risk in general. Indeed, there’s nothing wrong with that. In high-growth sectors, I’d have to agree that it’s better to conserve and protect capital, than to go all-out with outlandish bets that may turn disastrous.
With that said, let’s take a look at three stock picks that offer substantial growth, but relatively limited downside. These are among the top EV battery stocks I think best fit the portfolios of most conservative investor types.
| ALB | Albermarle | $227.24 |
| FCX | Freeport-McMoRan | $40.08 |
| LAC | Lithium Americas | $20.99 |
Albemarle (ALB)
Albemarle (NYSE:ALB) doesn’t manufacture batteries, but instead supplies the lithium required in the development of EV batteries. It’s also the largest lithium miner in the world. Thus, conservative investors will like the company’s scale and global footprint, as it provides greater geographic and product diversification. Currently, Albermarle has key operations in the U.S., Chile, and Australia.
As a rule, a more diversified portfolio is a safer portfolio, and safety is attractive to conservative investors. Although Albemarle is large and relatively safe, it isn’t without issues. One of the key drawbacks some conservative investors may focus on, for example, is the company’s seemingly high beta of 1.54. The greater the beta of a company (with 1.0 being the baseline), the greater the stock’s expected volatility relative to the overall market.
But volatility is a part of commodity investing. Lithium prices took off on a sky-high trajectory in 2022. That was a boon for Albemarle and other lithium companies. However, lithium prices then plunged from November to April. Since then, lithium prices have doubled. You see where I’m going with this.
That said, over that period, Albemarle hasn’t lost much ground. This stock is one that’s shown the ability to preserve investor capital and grow considerably in good times. That’s the kind of risk/reward bet investors should want to take right now.
Freeport-McMoRan (FCX)
Freeport-McMoRan (NYSE:FCX) is another commodity stock for investors to consider. However, the company doesn’t mine lithium at all. Instead, it mines gold, copper, and molybdenum, all of which are used in making EV batteries.
Thus, FCX stock is arguably a more diversified investment than Albemarle. Gold, of course, moves in inverse relation to overall economic concerns in financial markets and dollar concerns. That can potentially buffer losses when EV applications are in lower demand and prices might otherwise fall. But at the same time, Freeport-McMoRan has a beta of 1.99, which means it is roughly twice as volatile as the average stock.
Thus, FCX stock isn’t without risk. That said, the company’s share price has held quite steady over the past two-and-a-half years. Further, Freeport-McMoRan shares include a dividend that conservative investors will appreciate. While relatively small (yielding roughly 1.6%), it’s still a dividend, and provides relative stability and amplifies total returns in bull markets.
Lithium Americas (LAC)
Construction recently began at Lithium Americas’ (NYSE:LAC) Thacker Pass lithium mine in March. Thacker Pass sits on the largest lithium deposit in the United States and the second largest in the world, based on proven reserves. Conservative investors who are also politically conservative will appreciate the national security aspect of Lithium Americas as an investment. The less the U.S. has to rely on foreign lithium, the better.
Activities at the site are expected to begin in the second half of 2023. Lithium Americas also operates two sites in Argentina. The first, the Cauchari-Olaroz mine, is targeting initial lithium production this month. The other, in the Pastos Grandes Basin, is targeting a construction decision by Q4.
LAC stock is volatile relative to general stocks with a beta of 1.58. However, this stock also has among the best risk/reward profiles of the three stocks on this list. Thus, as far as conservative EV battery stocks are concerned, Lithium Americas is one to buy right now.
On the date of publication, Alex Sirois 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.
