Due to its electrochemical properties, lithium is seen as a crucial component of batteries which will drive the energy transition. Consequently, stocks of the top lithium companies increasingly figure on astute investors’ radars! Here are the top 5 lithium stocks to buy in 2022.
In an article for Insider Monkey, Ramish Cheema pointed out that several market estimates have indicated a positive outlook for lithium stocks. Metal has become a highly coveted commodity because of the role it is expected to play in the green energy transition.
According to a report by Fortune Business Insights, the lithium industry is expected to grow at 8.1% CAGR to be valued at $6.6 billion by the end of 2028.
In terms of the different applications of the material, the Fortune Business Insights report highlighted that the battery segment was expected to dominate the market. The report also claimed that while North America would witness rapid growth in the industry, the bulk of the market share would be held by the Asia Pacific.
It is in this context that Cheema has compiled a list of the top lithium stocks by using their current relevance to industry developments coupled with financial metrics like share price valuation, revenue growth, market size and share etc. Cheema’s list reproduced below ranks firms according to hedge fund sentiment courtesy of Insider Monkey’s 895 hedge fund survey for the second quarter of 2022:
Top 5 Lithium Stocks
An American company headquartered in Belmont (North Carolina), Piedmont Lithium Inc. explores and develops lithium projects. The company owns two properties in North Carolina that are spread over thousands of acres.
Piedmont Lithium Inc. has an agreement with a Canadian company which will allow it to buy lithium from a Canadian mine at the rate of $900 per metric ton – a price which is significantly below current market prices for the mineral. This will enable Piedmont to earn a significant gross profit. The facility is located in Abitibi (Quebec) and is expected to enter production in the first quarter of 2023.
Insider Monkey’s Q2 2022 survey of 895 hedge funds highlighted that 11 of these had invested in Piedmont Lithium Inc.
Cowen kept a $90 share price target for Piedmont in June 2022 and stressed that the company had significant potential to grow its operations in the US.
Headquartered in London, Rio Tinto Group is a diversified metals miner that focuses on several materials, including lithium, gold, copper, diamonds, and titanium oxide, amongst others. The company has beaten analyst revenue estimates since 2017.
Rio Tinto has a forward price-to-earnings ratio of 6.1, which is lower than its normal P/E ratio of 10.3. This indicates that the stocks hold a lot of value. As the third largest mining company in the world, it also generated a strong 48% of its EBITDA as free cash flows last year and has an annual dividend of $16 for a 9% yield.
24 of the 895 hedge funds polled by Insider Monkey for their June quarter of 2022 holdings had held a stake in Rio Tinto.
Rio Tinto Group’s largest investor is Ken Fisher’s Fisher Asset Management. It owns 14.8 million shares that are worth $905 million.
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3. Sociedad Química y Minera de Chile S.A. (NYSE:SQM)
\With a 25% market share, Sociedad Química y Minera de Chile S.A. is one of the largest lithium suppliers in the world. The life of its reserves is estimated to be more than 20 years. Furthermore, 70% of the company’s lithium st0ck volumes have been contracted at current spot prices, protecting it from future price drops.
Sociedad Química y Minera de Chile S.A. is expected to grow its volume by 37% annually in the second half of this year. Deutsche Bank raised the company’s share price target from $105 to $115 in August.
Insider Monkey’s poll of 895 hedge fund portfolios for Q2 2022 indicated that 29 of these owned Sociedad Química y Minera de Chile S.A.’s shares.
Out of these, Paul Marshall and Ian Wace’s Marshall Wace LLP is Sociedad Química y Minera de Chile S.A.’s largest investor and owns 1.7 million shares worth $147 million.
2. Livent Corporation (NYSE: LTHM)
Headquartered in Philadelphia (Pennsylvania), Livent Corporation is an American company that makes and provides lithium compounds for different applications, including batteries, polymers, pharmaceutical products, and aerospace applications.
Livent Corporation aims to more than triple its lithium production capacity by 2030. Its lithium carbonate capacity is estimated to increase from roughly 20 kilotons per annum by the end of 2022 to 100 kilotons per annum by the end of 2030. CICC set an Outperform share price rating and a $27.30 share price target for the company in August 2022.
30 of the 895 hedge funds polled by Insider Monkey during 2022’s second quarter had invested in the company.
Robert Karr’s Joho Capital is Livent Corporation’s largest investor and owns 3.9 million shares that are worth $89 million.
1. Albemarle Corporation (NYSE:ALB)
Headquartered in Charlotte (North Carolina), Albemarle Corporation is a speciality chemical manufacturer and seller which offers several different kinds of lithium compounds. These compounds are used in a wide variety of applications.
In the latest quarter, Albemarle Corporation beat Wall Street estimates and grew its revenues annually by 91%. Lithium grew over 2021 and accounted for 42% of the overall revenues. During the same period, the company’s lithium sales shot up by 178% annually, with volumes growing by 18%.
By the end of this year, Albemarle Corporation expects its operating income to grow by as much as 300% annually. Deutsche Bank increased the company’s share price target to $270 from $255 in August 2022 and added that the second quarter results were impressive.
Insider Monkey’s Q2 2022 survey of 895 hedge funds revealed that 39 had bought Albemarle Corporation’s shares.
Marshall and Ian Wace’s Marshall Wace LLP is Albemarle Corporation’s largest investor. It owns 739,388 shares that are worth $154 million.