Weakness in lithium stocks is an opportunity. Granted, prices have slipped on the speculation of a surplus supply, but supply is tight. It’s why companies like Exxon Mobil (NYSE:XOM) have supply deals with companies, like Lithium Americas (NYSE:LAC). Also, remember, according to Stellantis (NYSE:STLA) CEO Carlos Tavares, there’s not enough lithium to go around for the industry’s green plans.
In addition, according to Morningstar, “Rising electric vehicle adoption and the increasing buildout of energy storage systems will keep lithium demand growing to surpass 1 million metric tons in 2024, from 800,000 in 2022, eventually hitting 2.5 million metric tons by 2030. While we see rising supply, we think enough projects will face delays to maintain a market deficit as demand grows.”
I’ve been arguing these same points for quite some time. And I strongly believe markets are still undervaluing related stocks. For that reason, I’d use recent weakness as an opportunity.
Lithium Stocks: Albemarle (ALB)
Every time I write an article on lithium, Albemarle (NYSE:ALB) makes the top of the list. Not only is it exceptionally oversold at $134.44, but its upside potential is significant. In fact, from its current price, I’d like to see it retest $172 again shortly. We also have to remember that if we really had enough lithium supply, the Department of Defense would not have awarded ALB a $90 million contract to boost production at its North Carolina mine.
Also, while ALB has seen a good number of downgrades and price target cuts, I strongly believe firms are overreacting, too. In short, ALB is attractive at current prices. Lithium demand will only increase and supply will not be able to catch up any time soon.
Sigma Lithium (SGML)
There’s also Sigma Lithium (NASDAQ:SGML), which is starting to pivot higher. In fact, after testing a low of $24, the lithium stock is now back up to $27.74 and could test $30 near term. It’s also just starting to pivot from over-extensions on relative strength (RSI), MACD, and Williams’ %R.
Helping, the company has been attracting acquisition interest. In fact, as I noted on Sept. 28, “The companies and the project have attracted interest from potential strategic partners, including global industry leaders in the energy, auto, batteries and lithium refining industries,” according to the company.
In addition, Sigma Lithium also just announced it achieved record peak production of 890 tonnes of chemical-grade lithium concentrate at its Greentech plant. And it just said its Phase 2 and 3 expansion plans are proceeding as planned.
Global X Lithium & Battery Tech ETF (LIT)
Another safe way to trade recent lithium weakness is with an exchange-traded fund (ETF) like the Global X Lithium & Battery Tech ETF (NYSEARCA:LIT). Not only is it excessively oversold, but it also offers solid exposure to other beaten-down lithium names at a low cost.
Trading at $48.30 with an expense ratio of 0.75%, some of its top holdings include Albemarle, Tesla (NASDAQ:TSLA), BYD (OTCMKTS:BYDDF), Panasonic Holdings (OTCMKTS:PCRFY) and Livent (NYSE:LTHM) to name a few of the fund’s 46 holdings. From a current price of $48.30, I’d like to see the LIT run back to $60 initially.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
