As Baron Rothschild would tell you, “Buy the blood in the streets, even if the blood is your own.” Or, as Warren Buffett says, “Be greedy when others are fearful.” At the moment, given the bloodshed in lithium stocks, it’s time to get greedy.
Sure, lithium is slipping on falling prices and supply fears. We can see the chaos in Albemarle (NYSE:ALB) – the 800 lb. gorilla that slipped from about $246 to $110. But don’t write off lithium stocks off just yet. Instead, take advantage of the temporary weakness. With the world fighting to go green, demand is still expected to explode along with these three oversold lithium stocks.
In fact, according to Morningstar, we “continue to forecast a price rebound as strong demand growth outpaces supply leading to a supply deficit in 2024. In our view, rising EV adoption and the increasing buildout of energy storage systems will keep lithium demand growing to surpass 1 million metric tons in 2024, from 800,000 in 2022, eventually hitting 2.5 million metric tons by 2030. While we see rising supply, we think enough projects will face delays to keep a market deficit as demand grows.”
That being said, investors should consider buying the weakness in lithium stocks, such as:
Albemarle (ALB)
Albemarle — the aforementioned 800 lb. gorilla of the lithium market – hasn’t been this cheap since late 2020. And I’d take full advantage of it at its current price of $124.59. For one, the pullback and the number of analysts out with downgrades is overkill at this point.
Two, even with the lithium price slump, sales are still expected to grow about 30% this year. As noted by Kiplinger, “Albemarle’s long-term growth outlook remains robust, as it has forecasted its net sales to grow at a compounded annual growth rate between 20% and 30% over the next five years. Out of 18 analysts covering ALB in the past three months, 13 say it’s a Buy.”
Three, ALB is trading at just six times forward earnings, and less than half of growth, with a price to earnings growth ratio of just 0.32. That’s ridiculously cheap for ALB. With ALB, buy it, forget about it, and check back in a few months.
Global X Lithium & Battery Tech ETF (LIT)
Or, there’s also an ETF like the Global X Lithium & Battery Tech ETF (NYSEARCA:LIT).
I always like to add in an exchange-traded fund with most of my articles. That’s because they offer far better diversification than single-stock buys, and they’re oftentimes cheaper.
With LIT, after hitting a high of about $95, LIT is now down to $49, and is just as oversold. From its current price, I’d like to see it initially retest prior resistance around $60.
With an expense ratio of 0.75%, the LIT ETF invests in the complete lithium cycle. Everything from mining and refining the metal through battery production. Some of its top holdings include Albemarle, TDK Corp. (OTCMKTS:TTDKY), BYD Co. (OTCMKTS:BYDDF), Tesla (NASDAQ:TSLA), Livent Corp. (NYSE:LTHM) and Piedmont Lithium (NASDAQ:PLL).
Sigma Lithium (SGML)
There’s also Sigma Lithium (NASDAQ:SGML), which is showing signs of life again.
After slipping from about $39 to a low of $22 on supply issues, SGML just rallied back to $28.50. From here, I’d like to see it rally back to $40. Helping, the company just reported its first quarter of revenue generation with $97 million.
Even better, “Sigma Lithium also just announced it achieved record peak production of 890 tonnes of chemical-grade lithium concentrate at its Greentech plant. And it just said its Phase 2 and 3 expansion plans are proceeding as planned,” as I noted on Oct. 30.
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.
