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Thanks to global green initiatives and the increasing demand for electrical vehicles (EVs), lithium stocks could be a good place to invest if you’re looking for growth and capital appreciation. As one of the core components of lithium ion batteries that power EVs and mobile devices, lithium miners and their stocks stand to reap the rewards of this booming market.
With national governments incentivizing EV ownership in pursuit of a greener world, demand for lithium is expected to increase with a compound annual growth rate (CAGR) of 10% through 2026. While the bulk of lithium demand resides with the EV manufacturers, other applications for the metal include consumer electronics, energy storage, medical and other end-user industries.
Many of the stocks covered in this article already have made substantial moves to the upside over the past 2 years. As with any industry in the early stages of growth, however, these stocks could continue to appreciate and provide investors with dividend income.
Overview: Lithium Stocks
Lithium is a soft, silver, white-colored alkali metal and a chemical element with the atomic number of 3 and the symbol Li. The metal is present in the minerals spodumene and lepidolite and was discovered in 1800 by Brazilian chemist and statesman José Bonifácio de Andrada e Silva in a mine on the Swedish island of Utö.
The first industrial uses of lithium were in high-temperature stable greases used in aircraft engines. Demand for lithium increased after World War II because of its role in the production of tritium, which was used as a solid fuel in nuclear fusion weapons. Lithium was later used to lower the melting temperature of glass and aluminium oxide.
Demand for lithium decreased after the Cold War ended until 2007 when lithium ion batteries came on the market. In 2010, 40% of lithium was used to manufacture glass and ceramics and 14% for batteries. Since then, demand for lithium has increased exponentially because of its use in EVs, consumer electronics and other products.
Best Online Brokers for Lithium Stocks
Of the 5 stocks we’ve selected, 3 can be purchased through any major broker with access to major U.S. stock exchanges like the New York Stock Exchange (NYSE) and the Nasdaq Stock Market. The 2 other stocks trade on the over-the-counter (OTC) market, so you should consult with your stock broker to see whether they have access to those markets.
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Features to Look for in Lithium Stocks
Type of mines:
The production of lithium comes from 2 major types of mines: hard rock mining and extraction from brine deposits. Brine deposits consist of ground water accumulations that contain lithium with lithium from these deposits extracted as a salt. Hard rock production involves a more traditional mining technique with lithium taken from a mineral called spodumene.
The 2 predominant types of lithium are lithium carbonate and lithium hydroxide, with lithium hydroxide the preferred type for battery production. Lithium mined from spodumene can be turned into either of the 2, but lithium extracted from brine must 1st be turned into carbonate before conversion into hydroxide. Because of the lack of hydroxide conversion, miners with hard rock operations would be more suitable to supply the EV market.
Much like other publicly traded stocks, the company’s fundamentals play a key role in its stocks’ capital appreciation. Whether the company is currently making money, its level of debt and other fundamentals can be a good indicator that the stock will appreciate in time. Statistics such as a stock’s earnings per share and other indicators of the financial health of a company can provide indications of a stock’s future performance.
Many lithium mining operations are located outside of the U.S. Also, international mining companies often must partner with local firms to access the natural resources of the country where deposits are located. The world’s largest producer of lithium is Chile with more than half of the world’s production. Australia, Argentina and China are also significant producers of lithium.
Is Now the Time to Buy Lithium Stocks?
Although lithium ion batteries have been around for some time, their use has become increasingly relevant to the lithium mining industry because of the push for environmentally sound policies and the growing popularity of EVs and electronic devices that use them.
If you’re interested in investing in an industry projected to grow significantly, you should seriously consider buying lithium stocks since demand for the metal is expected to increase considerably over the next few years. Also, as new technologies emerge that use lithium, demand for the metal could rise even more.
Some of the lithium stocks listed above even qualify for our stocks under $10 category, although any could be a good fit for a portfolio. Lithium penny stocks might show especially notable growth. Even if the market pulls back from its current levels, lithium stocks could represent a good long-term investment.
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