Investors should keep an eye out for lithium stocks to buy, as they could be poised to rise in the near term. Lithium is used to make batteries for electric vehicles and consumer electronics. The public companies that mine the rare earth mineral have hit major lows over the past 12 months. Oversupply in the broader lithium market as well as waning demand for electric vehicles led to plummeting prices for the rare earth mineral. Looking at movements in lithium carbonate prices in 2024, things seem to be changing. According to Koyfin, lithium carbonates prices have risen more than 14% YTD, indicating oversupply issues are likely coming to an end.
However, stock market volatility remains. Elevated interest rates and sticky inflation will likely send jolts through U.S. equities. If a stock market crash ensues, these are the three lithium stocks to buy.
Albemarle (ALB)
Albemarle (NYSE:ALB) continues to be a major player in the lithium carbonate mining space. The lithium miner has been able to develop a presence in Chile, Argentina, Australia and the United States, creating an overall diversified lithium business. Unfortunately, Albemarle has not been immune to the sharp decline in lithium prices. This hurt earnings throughout 2023 and continues to do so in 2024. In the miner’s first quarter earnings report of 2024, revenue came in line with expectations but represented 38% Y/Y decrease from the same period in 2023. Albemarle’s earnings per share figure was a bright spot, coming in at 0.26/share for the quarter.
Despite headwinds in the lithium market, ALB deserves another look from investors if a market crash does indeed occur. The stock is trading at 31.4x forward earnings; a decline in valuation is certainly welcomed.
Sociedad Quimica y Minera de Chile (SQM)
Sociedad Quimica y Minera de Chile (NYSE:SQM) is the second entry on our list and happens to also be the second-largest producer of lithium globally. The company maintains sizable operations in Argentina and Chile. One of the largest lithium mines in the world is Salar de Atacama, Antofagasta, Chile, and SQM has a large operation there. Similar to Albemarle, SQM has suffered from falling lithium prices. In 2023, total revenue declined more than 30% from $10.7 billion in 2022, a great year for the company, to just $7.5 billion.
Near term headwinds remain, so shareholders should not expect top-line growth to pick in the short run. The lithium carbonate market will rebound, but this depends on a number of factors, including interest rates. SQM’s relatively cheap valuation, which currently floats around 9.2x forward earnings, should keep it on any lithium investor’s watch-list.
Global X Lithium & Battery Tech ETF (LIT)
Now if you’re a cautious investor and would not like direct exposure to one lithium company, an exchange-traded fund may be an interesting investment option. The Global X Lithium & Battery Tech ETF (NYSEARCA:LIT) is a $1.6 billion ETF that holds around 48 stocks related to lithium and battery technology. In particular, LIT invests in public companies that operate across the materials, metals, and mining sectors as well as both growth and value stocks.
Albemarle and SQM are a part of the ETF’s current holdings as well as EV giants Tesla (NASDAQ:TSLA) and BYD (OTCMKTS:BYDDY). Shares of LIT have fallen 26% for the year, which underscores the way in which a lot of lithium-related stocks have felt the heat in recent months. However, a market crash would make LIT, and many of its holdings, attractive investments.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
