If you walk away from this site with just one investment idea, make it this one: Lithium. To me, this is one of the absolute best opportunities over the next decade and a huge driver of the next-generation energy trend.
As I’ve talked about, my investing approach looks at the big picture of where the world is and, more importantly, where it will be 10-20 years from now. Think about when the first cell phone was released. Investors who believed the clunky contraption would soon number in the billions around the world are now filthy rich.
A similar situation is setting up for lithium as Wall Street is overlooking the way energy is stored and will be stored in the future. Specifically, the demand for lithium in the use of electric vehicles (EV) is set to soar. Economics 101 tells us that when demand outweighs supply, prices move higher, and that’s the long-term future for lithium.
The EV and energy storage markets currently contribute less than 20% of lithium demand. However, strong growth backed by 14 new lithium ion battery mega-factories has the promise to create a huge market here. Global lithium ion battery production is forecast to grow by an unbelievable 521% between 2016 and 2020. If that’s not a next-gen theme, I don’t know what is!
If you’re skeptical about electric vehicles breaking into the mainstream market, I understand. In 2015, 71,000 battery electric vehicles (BEV) were sold in the United States, making up just 0.4% of all auto sales. But again, here’s where taking the long-term outlook on a trend gives us an advantage. By 2040, it is estimated that 35% of cars sold will be BEVs, putting sales close to 40 million.
As a result, the amount of energy pulled from the grid will skyrocket. According to Bloomberg New Energy Finance, BEVs will pull more than 1,900 terawatt-hours (TWh) from the grid each year. To put that in perspective, that’s enough energy to power the entire United States for 160 days.
I hope this illustrates the huge potential within this theme, and why now is a good time to position ourselves in the sector’s most dominant players. One name that stands out to me is Chemical & Mining Company of Chile (SQM). Chile is a major player in the lithium game, with estimates showing that a fifth of global supply comes from this country. SQM is a well-known player in this space as the second-largest lithium producer in the world, making up about 22% of total production, and stands to benefit from the increasing need for rechargeable lithium-ion batteries.
Feeling energized yet? Bad puns aside, this is definitely an excited sub-sector of energy that very few investors are paying attention to. By getting in early, we stand to profit significantly as expansion in lithium meets the world’s growing needs.
Speaking of growing needs, my next two niches definitely play a major role in how energy demand will change in the future. I’ll have more on that for you in my next article!