Lithium stocks may be some of the most hated investments at the moment. However, that gives us even more reason to buy. As we’ve learned from some of the most famous investors, a crisis will lead to opportunity.
Sir John Templeton taught us to buy excessive pessimism. Warren Buffett tells us to “be fearful when others are greedy and to be greedy only when others are fearful.” Even Baron Rothschild said, “The time to buy is when there’s blood in the streets, even if the blood is your own.”
When the herd is fearful, it sells at the wrong time. When they’re greedy, they buy at the wrong time. Plus, as pointed out by the Heritage Investment Group, “These emotions still drive many investors to make changes at precisely the wrong times, and investors as a group have not improved on this front.”
With fear way out of hand, now is the time to buy down, but not out lithium stocks.
Albemarle (ALB)
Weakness is an opportunity with lithium stocks, like Albemarle (NYSE:ALB). First, at just $81.65, ALB is ridiculously oversold. Second, it’s technically overextended on RSI, MACD and Williams’ %R.
Third, with lithium mines being shut down or delayed, we will eventually run into another supply shortfall as demand for “all things green” increases. We saw the same thing happen in 2020 before ALB exploded from about $51 to a high of $305.
Plus, while we wait for the eventual recovery with ALB, at least we can collect its 2% yield. Granted, firms like UBS just cut its price target on ALB to $101. Bank of America lowered it to $126. But even with those price revisions, they’re still telling us ALB is severely undervalued. Again, ALB’s pullback is wildly overdone.
Buy the fear, collect the yield, and check back in on it in a few months. Eventually, it’ll come back strong on undersupply issues.
Standard Lithium (SLI)
Weakness is also an opportunity with Standard Lithium (NYSEAMERICAN:SLI).
Last trading at $1.12, it’s holding on to strong support dating back to January. From here, I’d like to see it initially retest $1.50. Helping, the company partnered with Equinor to develop lithium projects in the Smackover Formation of east Texas and southwest Arkansas.
As part of the deal, Equinor will fund the first $40 million of development costs at the southwest Arkansas project. It will also fund the first $20 million in exploration and development costs at the East Texas property. Equinor also now holds a 45% stake in the properties.
Even better, three analysts currently rate SLI as a strong buy with an average price target of $3.97. The highest price target on SLI is $4.75. The lowest is $3.50.
Amplify Lithium & Battery Technology ETF (BATT)
If you want to diversify at a significantly oversold price, buy the Amplify Lithium & Battery Technology ETF (NYSEARCA:BATT).
At just $8.01, it’s technically oversold at support dating back to 2020. It’s also overextended on RSI, MACD and Williams’ %R. However, with bigger demand for “all things green,” especially electric vehicles, I’d like to see the BATT ETF rally back to $12 initially.
With an expense ratio of 0.59%, BATT invests in companies involved with battery storage, battery metals, materials and electric vehicles. Some of its top holdings include Tesla (NASDAQ:TSLA), BYD (OTCMKTS:BYDDF), Panasonic Holdings (OTCMKTS:PCRFY), BHP Group (NYSE:BHP), Albemarle, and Ganfeng Lithium (OTCMKTS:GNENF).
On the date of publication, Ian Cooper did not have (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
