It’s not been the best year for lithium stocks so far. A slowing vehicle market, surging interest rates and profound economic weakness in the pivotal Chinese market have all weighed on the sector.
However, investors shouldn’t lose sight of the longer-term possibilities. Many governments are passing regulations that will greatly speed up the conversion of vehicle fleets toward electric models. In some cases, we’re even seeing outright bans on internal combustion engines coming down the pike.
All this sets the stage for a long structural uptrend in the demand for lithium. Investors who can look past the current weakness will enjoy a tremendous opportunity with these three leading lithium stocks to buy now.
Sociedad Quimica y Minera de Chile (SQM)
Sociedad Quimica y Minera de Chile (NYSE:SQM) is Chile’s leading specialty chemical producer, with a focus on the lithium industry.
SQM stock has had an eventful 2023. Misleading media reports around a purported nationalization of the Chilean lithium industry sent SQM shares crashing this spring. They would, however, partially recover once Chile clarified it was seeking a public-private partnership for the industry rather than aiming to expropriate any lithium assets.
The relief wouldn’t last long, though. Lithium prices have declined by roughly two-thirds since their 2022 peak due to a decline in demand out of China. China is a key producer of lithium batteries and an increasing consumer of finished goods such as electrical vehicles (EVs) as well. So, China’s current economic doldrums are having an ill effect on lithium stocks such as SQM.
However, China’s near-term economic problems hardly invalidate the broader lithium thesis. With the structural shift toward EVs, lithium demand will soar over time. Low-cost producers like SQM stand to profit.
Albemarle (ALB)
Albermarle (NYSE:ALB) is a leading multinational specialty chemical and lithium company. The firm is based in North Carolina and has lithium mining operations spanning North America, Chile and Australia.
ALB stock got caught up in the same political drama as SQM earlier this year, leading to a sharp decline in Albemarle’s stock price. However, investors should consider that Albemarle has a more international footprint, making it less at risk from any one government’s actions. Furthermore, Albemarle is pursuing further acquisitions, which will provide additional diversification for its business.
Albemarle has been in business for decades, building up a tremendous track record of profitability and stability. In fact, the company is a Dividend Aristocrat, meaning it has increased its dividend for more than 25 consecutive years. That’s an especially notable achievement for a basic materials company and speaks to Albemarle’s strategic vision in building its long-term lithium empire.
Panasonic Holdings (PCRFY)
Mining firms aren’t the only way to get exposure to lithium stocks. Investors can also profit from the companies that turn raw lithium into end goods, such as batteries.
Looking at the Global X Lithium & Battery Tech ETF (NYSEARCA:LIT), the third-largest position within its portfolio is Panasonic Holdings (OTCMKTS:PCRFY). Investors probably know Panasonic for its wide array of consumer electronics such as speakers, home cinema systems, cameras and display panels — among other goods.
However, as part of its efforts to make these products, Panasonic integrated its supply chain, including the production of batteries. In fact, it has more than 40 years of experience making batteries and is now a leader in producing lithium batteries for applications including autos, Internet of Things (IoT) devices and infrastructure.
As the market for EVs and other cutting-edge products expands, so will the total addressable market for Panasonic’s batteries. And the lithium battery upside comes at a minimal cost, with PCRFY stock selling at less than 10 times forward earnings today.
On the date of publication, Ian Bezek did not hold (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.
