The pullback in lithium stocks is overdone. In fact, you may want to use the latest weakness as an opportunity to buy.
After all, with electric vehicle demand only set to accelerate, the world must get its hands on more lithium supply. The problem is that demand far outweighs supply. Even lithium producers have warned supplies may not meet demand any time soon.
“Lithium producers are growing anxious that delays in mine permitting, staffing shortages, and inflation may hinder their ability to supply enough of the battery metal to meet the world’s aggressive electrification timelines,” reported Reuters.
“There were 45 lithium mines operating in the world last year, with 11 expected to open this year and seven next year, according to Fastmarkets,” they added. “That pace is far below what consultants say is needed to ensure adequate global supply,”
With that supply-demand issue unlikely to balance out any time soon, it just makes sense to buy lithium stocks for the long haul.
Lithium Americas (LAC)
I’ve mentioned Lithium Americas (NYSE:LAC) quite a few times these last few weeks. And I still strongly believe it holds immense potential.
For one, the company may have just uncovered a lithium hotspot in a U.S. super volcano – which may hold between 20 million and 40 million metric tons of lithium. Two, the company recently split into two companies. One will be Lithium Americas (Argentina). The other will be Lithium Americas, which will focus on hot spots, such as Thacker Pass.
Even better, the U.S. Department of Energy (DOE) may loan LAC about $1 billion to get the Thacker Pass mine up and running, as I also mentioned earlier this week. That’s in addition to the $650 million investment from General Motors (NYSE:GM) a few months ago. Plus, LAC has become ridiculously oversold. From current prices, I’d like to see the lithium stock double with patience.
Standard Lithium (SLI)
Standard Lithium (NYSEAMERICAN:SLI) is another incredibly oversold lithium stock to buy and hold.
At $2.59 a share, it now sits at support last tested in early 2021. From its current price, I’d like to see it initially test $6 again near term. Longer term, I’d like to see it again challenge its high of $12.30.
Remember, SLI has promising projects throughout Arkansas, as does Exxon Mobil. In fact, Exxon has plans to build lithium processing facilities in the region, with the capacity to produce up to 100,000 metric tons of lithium a year, as noted by The Wall Street Journal.
Also, while nothing has been said yet, perhaps Exxon Mobil will take a look at Standard Lithium, as a potential acquisition target. Of course, that’s just speculation on my part right now.
Global X Lithium & Battery Tech ETF (LIT)
Or, if you want to safely diversify among top industry names, consider an ETF like the Global X Lithium & Battery Tech ETF (NYSEARCA:LIT).
With an expense ratio of 0.75%, some of its top holdings including Albemarle (NYSE:ALB), BYD (OTCMKTS:BYDDF), Tesla (NASDAQ:TSLA), Livent Corp. (NYSE:LTHM), Piedmont Lithium (NASDAQ:PLL) and Standard Lithium. The LIT ETF is just as oversold as its components.
After plunging from about $68 to a current price of $52.71, the pullback is overdone. From its current price, I’d like to see it retest $68 again near term and longer term, perhaps challenge $80 a share.
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.
