Supply issues crushed lithium stocks. However, as I noted on Dec. 5, “the fear is creating a massive opportunity for patient investors.” I also said, “I’d use the temporary, excessive fear as an opportunity.” That’s because the pullback was ridiculously overdone. Sure, supply issues still exist. But down the line, we won’t have enough supply to meet growing demand.
Remember, as noted by Morningstar, “rising electric vehicle 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 maintain a market deficit as demand grows.”
Plus, the biggest lithium producers in the world are still bullish on lithium. In fact, as noted by Reuters, “In calls with investors and analysts in recent days, lithium producers said they saw the market volatility as short term, adding that they expect electrification to keep growing.”
That said, I’d still buy lithium stocks on weakness.
Albemarle (ALB)
The last time I mentioned Albemarle (NYSE:ALB), the industry’s 800 lb. gorilla had plunged to a low of $123.38 on Nov. 29. It was also trading at six times earnings at the time, I noted, and at less than half of growth. None of which was sustainable.
Since then, ALB bounced back to about $128 and could refill its bearish gap around $170. Helping, Bank of America (NYSE:BAC) just upgraded ALB to a Neutral rating, noting the stock is undervalued. I’m not sure what took them so long, but it’s good to see they’re waking up. I also expect other firms to start jumping on the bullish ALB bandwagon again shortly.
Better, while we wait for ALB to recover lost ground, we can collect its 1.2% yield.
Livent (LTHM)
I also mentioned Livent (NYSE:LTHM) on Nov. 29, noting, “it’s wildly over-extended on relative strength (RSI), MACD and Williams’ %R. [Plus], according to the company, it still expects to see ‘significantly improved performance versus 2022.’”
At the time, LTHM just slipped to $13.54. It’s now up to $14.69. From here, I’d like to see it initially retest prior resistance around $19.
While JPMorgan (NYSE:JPM) and Piper Sandler lowered their ratings on the LTHM stock in recent days, that’s a bad call, in my opinion. With the lithium price pullback being a temporary event, investors should take full advantage of the weakness here and with other beaten-down lithium stocks. We also have to consider LTHM trades at 20% growth at the moment, too.
American Lithium (AMLI)
There’s also American Lithium (NASDAQ:AMLI), which plunged to a low of $1. Now up to $1.10, I still believe there’s good potential here. For one, it recently submitted an environmental impact assessment study for its Falchani lithium project in Peru, hoping for near-term approval.
Even better, AMLI “raised its estimates for the Falchani project by 476% from 2019, saying it could hold 5.53M metric tons of lithium carbonate equivalent, which would make it one of the world’s largest hard-rock lithium projects,” as noted by Seeking Alpha.
While its chart is nothing to write home about, this potentially lucrative Peru project could provide a massive upside catalyst.
On the date of publication, Ian Cooper did not hold (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.
