If you have been paying attention to companies like Tesla (NASDAQ: TSLA) that rely on battery technology, and lithium in particular, you might be wondering what are the best lithium stocks to buy?
Choosing the right stock is no mean feat because you are spoiled for choice. From small cap lithium stocks to Canadian and Australian lithium stocks, the list is seemingly endless.
You could invest in mining stocks directly or derivative plays like electric vehicle manufacturers. Or with all the options, you might prefer to simply select a lithium ETF, like the Global X Lithium ETF (LIT).
No matter how you get exposure to the basic materials sector, what’s indisputable is that lithium is a key ingredient in battery technology, and demand for it stretches from electric vehicle manufacturers to renewable energy sources like wind power turbines and solar powered cells.
So what are the top lithium stocks to buy?
Top Lithium Stocks To Buy: ALBEMARLE (NYSE:ALB)
For direct exposure, Albemarle (NYSE:ALB) is among the top lithium stocks to buy.
Albemarle develops and manufactures chemicals and is the largest producer of lithium globally.
The Charlotte, North Carolina headquartered company markets lithium carbonate, lithium hydroxide, lithium chloride and other lithium compounds used in consumer electronics and automobiles.
Albemarle stock price has been on a wild ride as speculators bet on it as one of the lithium stocks that could explode higher. Following a huge bull run, its share price corrected but it remains one of the most volatile stocks to buy in the specialty chemical industry.
Lithium is used not only in electric vehicles but extensively in consumer electronics like phones for the re-charging capacity of batteries.
The bottom line is Albemarle is well worth exploring if you want broad exposure to lithium without betting on an end-play like a single car manufacturer, such as Tesla NASDAQ: TSLA.
Best Lithium Stocks: Sociedad Quimica y Minera de Chile (NYSE:SQM)
Sociedad Quimica y Minera de Chile (NYSE:SQM) is a Santiago, Chile based company that produces and distributes industrial chemicals, specialty fertilizers and crops, as well as lithium and derivatives among other products lines.
It sells its products through a global network of distributors worldwide and has been doing so since 1968, and grown since then to a multi-billion dollar company.
For long-term oriented investors, SQM pays a modest dividend which is attractive for income and cash flow.
But if you compare SQM vs Albemarle, which is a better bet?
Neither company offers pure exposure to lithium because they both have diversified product lines.
However both have been caught up in the lithium craze in recent years.
As demand ramped up for lithium from car manufacturers and consumer electronics makers, production of lithium increased too in recent years causing oversupply concerns.
So which is better SQM or Albemarle?
If you want more direct exposure to lithium, SQM is the way to go because lithium represents a higher proportion of profit margin.
However, SQM is the smaller company and has been growing top line revenues related to lithium faster.
For conservative investors who like the longevity of a company that has prospered through numerous economic cycles and produces a dividend, SQM is the preferred choice. Investors who are more comfortable taking on greater risk may find Albemarle to be a better fit.
Lithium Stocks To Watch: FMC Corp. (NYSE:FMC)
FMC Corp (NYSE:FMC) is a chemical company that manufactures products in the agriculture, industrial, and consumer markets worldwide.
It operates two segments: FMC Agriculture and FMC Lithium, which manufactures lithium for use in batteries, glass and ceramics, lubricants and greases, polymers, pharmaceuticals, and other industrial applications.
If the history of a company is important to you, FMC Corp is hard to beat because it got its start back in 1883.
The company is based in Philadelphia and employs over 7,000 people.
In the lithium space, FMC has experienced some of the best earnings growth rates in recent years and is a similar size to its rivals now. It even pays a small dividend for income-oriented investors.
If the lithium boom continues, FMC Corp is among the best lithium stocks to buy but if you want more diverse exposure, the lithium ETF (LIT) may be your best bet.
Lithium Stocks ETF: Global X Lithium Battery & Tech ETF (NYSEARCA:LIT)
The Global X Lithium & Battery Tech ETF (LIT) has a goal to provide investment results that correspond to the price and yield performance of the Solactive Global Lithium Index before fees and expenses.
The management fee is 0.75% and the annual fund operating expense is 0.75%.
During our research, it had a beta of 1.04 relative to the S&P 500, which suggests it generally tracks the major market index.
The top 10 holdings of the Global X lithium ETF include:
FMC Corp (NYSE:FMC)
Albemarle Corp. (NYSE:ALB)
Sociedad Quimica y Minera de Chile (NYSE:SQM)
LG Chem Ltd.
GS Yuasa Corp.
Samsung SDI Co. Ltd.
Tesla (NASDAQ: TSLA)
BYD Co. Ltd – H
Electric Car Boom Tesla (NASDAQ:TSLA)
If you are looking for an indirect way to play the boom in Lithium, automakers are a great place to start.
Electric car companies like Tesla, as well as mainstream auto manufacturers, like BMW and General Motors , who have built out their product lines to include electric cars have caused massive spikes in demand for lithium.
And car makers are not the only companies causing lithium prices to spike. Smartphone makers like Apple and Samsung use lithium to produce cell phones and smart devices, like the iWatch.
With so much demand for lithium, the suppliers are the pure way to play a surge in lithium prices but the car makers benefit from the perceived transition to clean energy.
Lithium Stocks Takeaway
Each of these lithium companies has diverse product lines but SQM provides the greatest direct exposure to lithium.
FMC Corp is the oldest company of the bunch while Albemarle has enjoyed some of the highest revenue growth rates in recent years.
If you prefer exposure to a stock that relies on lithium, Tesla and other auto-manufacturers who concentrate heavily on electric vehicles are an indirect way to invest in lithium.
For investors who tend to be more conservative, the Global X Lithium & Battery Tech ETF (LIT) offers greatest diversification.
For hands-off conservative investors who prefer a more automated approach, companies like Personal Capital can help you to invest your money in a more diversified manner. Or if you are looking to avoid stock specific risk altogether, you could check out online real estate crowdfunding sites like Roofstock.
Do you have a lithium stocks list? What good lithium stocks have you found? Contact us and let us know.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.