Electric vehicles (EVs) are a disruptive technology—all on their own. But the EV chain is a long one, and there are significant opportunities here in everything from batteries to artificial intelligence and semi-conductors.
Our energy future is evolving rapidly, and it’s packed with EVs, massive energy storage solutions and nanotechnology.
• An amazing 1.26 million EVs were sold in 2015, 2 million were sold in 2016, and sales for this year are up 86 percent in the third quarter.
• Tesla’s 35 GwH capacity gigafactory plans to ramp up to 150 GwH
• Northvolt is planning a similar plant in Sweden
• Dyson is building a $1-billion gigafactory
• LG plans to open Europe’s largest EV battery factory in Poland next year
• General Motors (NYSE:GM) recently released plans to launch 20 EV models by 2023
• Renault is planning to double its EV offerings in the next five years
• Panasonic just announced the start of automotive lithium-ion battery production at a plant in Himeji, Japan from 2019 (adding to its existing five plans in Japan, which supply Tesla).
• Investments in new lithium ion battery capacity out to 2020 are in excess of $12 billion and rising according to Benchmark data.
For miners of lithium, cobalt, and graphite … for aluminum producers … for the giant automakers who let Tesla lead the way and are just now starting to play catch-up ... and for the artificial intelligence and semiconductor geniuses on this chain, the investment opportunities are amazing.
Major metals shortages are looming, technological advances are mind-blowing and things we thought impossible are now already entering the mainstream.
Here are 5 stocks for investors looking to latch on to the EV chain, which isn’t all about Tesla.
#1 Albemarle (NYSE:ALB)
Albemarle has been a tremendous performer so far in 2017. This major producer of chemicals is the world’s largest supplier of lithium, and has been since early 2015 when it acquired Rockwood Holdings. Right now, ALB has about 35 percent of the global lithium market share with market cap of $15.16 billion.
Albemarle Corporation has risen 45.60 percent since October 11, 2016 and is trending upwards. It has outperformed the S&P500 by 28.90 percent. Right now, it’s trading at close to $140 per share and has seen its shares pop nearly 18 percent in the past three months.
And it’s definitely not smoke and mirrors. Real results have been a huge boost, with 31 percent year-on-year revenue growth in its segment for lithium and advanced-materials in Q1 2017.
The institutional sentiment increased to 1.25 in Q2 2017, compared to the 1.23 in Q1. The ratio has increased, as 244 active investment managers increased and opened new holdings, while 195 sold and reduced their equity positions in the company.
Analysts are waiting for the company to report earnings on November 6. They expect $1.07 EPS, up 17.58 percent or $0.16 from last year’s $0.91 per share.
Major catalysts include an up-coming doubling of lithium carbonate production capacity thanks to recent regulatory approval to expand at Greenbushes in Australia, which will begin in the Q2 2019. And there will be more growth before then, with capital expenditures of up to $400 million. Lithium is the key focus right now for Albemarle.
More good news for the company is that China is considering an eventual ban on production and sales of cars that run on diesel or gasoline, efforts to reduce carbon emissions and pollution and is also aimed at promoting the development of electric and hybrid vehicles. The news provided a boost to lithium stocks, including Albemarle.
Moreover, Albemarle recently said that it has developed a novel technology that would allow it to increase annual lithium production in Chile. The technology could help the company increase its lithium production in Chile to 125,000 metric tons of LCE (lithium carbonate equivalent) annually. As a result, the company has asked the Chilean Economic Development Agency, CORFO to increase its lithium production quota. CORFO officials stated that they see no reason to object to Albemarle request for an increase its production limit.
ALB is also planning to build additional lithium carbonate capacity in Chile in the early 2020s. Projects currently underway are expected to raise the company's total annual production capacity in Chile to more than 80,000 metric tons of lithium carbonate equivalent by 2020.
#2 Global Li-Ion Graphite Corporation (CSE: LION; OTC: GBBGF)
This could be the first company to bring us graphite ‘made in America’.
The enormous volume of lithium-ion batteries required to the changeover from fossil fuel power to electric power requires more graphite than it does lithium or cobalt, and demand for graphite is set to increase 200 percent in less than three years. By 2025, we’ll be looking at a 300 percent increase in demand. The scary part is that the U.S.—the largest consumer of graphite—doesn’t mine any. But it may soon, and that’s exactly why we’re looking at LION.
Global Li-Ion now has an option on one of the only past producing graphite mines in the United States. Even better, it’s located only 50 miles from Tesla’s Nevada gigafactory.
There’s nothing better for a graphite miner right now than to be in Tesla’s backyard. And there’s nothing better than being the only company sitting on what could become, if exploration and development work turn out to be successful, the only working tech-grade graphite mine in the country.
LION’s Chedic Graphite Mine in Nevada is a past-producing mine with the potential to contain a very large amount of graphite mineralization.
Drill hole locations are already planned, and geophysical surveys have already been completed. Optimism is running high because they’re now waiting on drilling permits, and Nevada is a mining-friendly state that’s been key to harness the energy revolution.
And it’s not just Tesla that LION is targeting as a potential customer. The bigger picture also includes voracious Chinese demand.
China’s crackdown on polluting industrial plants has taken 30 percent of its graphite electrode production capacity offline. That’s 300,000 tonnes of graphite capacity shuttered, leading to recent soaring prices for the metal. China has suddenly become an importer of graphite.
That means that graphite prices have been soaring. This year alone, shortages in China have driven prices to $16,330 per tonne. That’s a ninefold increase. On a global level, spot prices for graphite electrodes have jumped even more—hitting up to $35,000 per tonne as Chinese exports dried up.
In India, shares of graphite electrode manufacturers have doubled in the past three months thanks to a massive 300 percent jump in global electrode prices, and the momentum should remain steady driven by a sudden surge in electrode demand.
Global Li-Ion is also targeting the hungry Chinese and Indian markets, which it could access from its other graphite development in resource-rich Madagascar.
The company has an MOU to purchase the past-producing Ambato-Arana Mines in Madagascar, which is already permitted, with infrastructure in place, and, if the project proceeds as planned, production can go online in the near term. And it’s ideally situated to supply the massive demand for graphite coming from both China and India.
The Madagascar licenses total 4,375 hectares, and they are right next to a main highway, and only 200 kilometers from Madagascar’s main seaport of Toamasina. They’re also only 20 kilometers southwest of Sheritt’s Ambatovy nickel and cobalt mine.
But graphite is only the intro to this story. Graphite might be the next big wave, but the biggest potential opportunity that comes after it is graphene. Graphene is the real game-changer: It is project to be used in everything from artificial hearts and retinas to flexible electronic devices, EVs and even aircraft parts.
Considering tight supply, zero graphite mining in the U.S. and increasing demand, other companies in the graphite space have done well.
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#3 GM (NYSE:GM)
General Motors is the only other company within reach of Tesla, whether we're talking about range or sales volume. The company is poised to recoup ground it lost to Tesla—and it’s pretty serious about. Market response shows.
The company just announced plans to add two new EVs in the next 18 months. Overall, GM plans to launch an impressive number of 20 new all-electric vehicles by 2023. With this, the number one U.S. automaker joins several European and Japanese peers, who have vowed to speed up development of EVs.
October has been kind to GM. September was the best month for GM stock in the last 14 months. Just in the past two weeks, share prices have risen 11.3 percent, which was the highest weekly gain for the stock since it was listed on the NYSE in 2010. Moreover, GM is cheap relative to other automakers, and it offers a safe distribution.
In the last three months, shares of GMs have outperformed the auto industry. The company’s shares have increased 18.5 percent, while the industry gained 6.2 percent.
The company is increasing its production of EVs using cash from the sale of gasoline-fueled trucks and sport utility vehicles in the United States and China. It also intends to launch more than 10 new hybrid or electric vehicles aimed for the Chinese market by 2020.
The company has partnered with South Korean battery maker LG Chem to manufacture the Bolt battery system. There’s now a continual stream of good news coming out of GM, and finally—everyone believes that they’re ready to play catch-up with Tesla. A bit late, but shares now have upward momentum as a result.
#4 Nvidia (NYSE:NVDA)
The consensus seems to be that this stock is just going to keep climbing. Nvidia is the hottest stock on the market right now, and the top performer across the entire S&P 500. This stock has gone in only one direction—up.
NVDA designs graphics processing units for the gaming and professional markets, as well as the system on chip units for the mobile computing and automotive market.
There are a lot of naysayers because this stock is already up to over $196 a share (as of mid-day October 17), but there were skeptics when it was much lower and it just keeps climbing. It’s gained over 197 percent over the past year.
Artificial intelligence is being advanced for self-driving cars by companies like Tesla Motors (NASDAQ:TSLA), Alphabet (NYSE:GOOGL) and Apple (NYSE:APPL). It’s also got endless possibilities in healthcare, from algorithms that can process massive amounts of data for enhanced disease diagnosis, to what a possible cure for cancer, according to Zeta Global CEO David Steinberg.
Nvidia’s chips are the best out there— or at least the fastest. Nvidia’s chips are at the top of the list for artificial intelligence (AI), and they’re used in self-driving vehicle projects and Amazon’s Echo speaker—among many other things. Nvidia’s chips are central to the gaming industry, and it’s expected to report strong gaming segment sales thanks to demand for Nintendo Switch.
This company’s future pipeline is also something to get excited about. In the third quarter, Nvidia is expected to start shipping its next-gen Volta GPU architecture for artificial intelligence. This could extend Nvidia’s lead over others in this hot subspace.
At the same time, this stock is trading at 50 times earnings anticipated over the next year, and growth is expected to slow. But everyone’s know this for some time, and still—the stock continues to climb.
#5 ALCOA (NYSE:AA)
Alcoa has become synonymous with aluminum. It’s got the largest bauxite mining portfolio in the world—and bauxite is the key element used to produce aluminum. It also has a large refining and smelting system.
What we’re looking at specifically here is the fact that aluminum is increasingly replacing steel to improve the fuel efficiency of vehicles and is important for EV manufacturers in effort to extend the range of their vehicles.
Between 2013 and 2016, replacing steel in vehicles led to additional demand of 1.6 million metric tons of aluminum.
Overall, this entire industry is looking great. Zacks Industry Rank puts the metal products-distribution pace at 28 out of some 250 industries.
Alcoa is expected to post adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of $536 million in 3Q17—compared to $483 million in 2Q17 and $265 million in 3Q16. Year over year, Alcoa’s earnings have risen 53.80 percent. The stock appeared $49.30 above its 52-week highs and is up 2.49 percent for the last five trades.
Not only is Alcoa currently one of the top three in the industry, but it’s also seeing solid estimate revisions, suggesting it could be a very interesting choice for investors. Its shares have gained 69 percent this year.
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Earlier this week, the company decided on the early termination of a power contract tied to the Rockdale smelter in Texas. The contract was originally meant to expire no later than 2038. Alcoa is expecting annual net income to be boosted by $60 million to $70 million as a result of the early termination, starting in the fourth quarter. It expects to book a one-time charge of about $250 million in the fourth quarter because of the deal.
Honorable Mentions in the EV chain space:
Tesla Motors (NASDAQ:TSLA): No large cap company has dazzled over the past couple of years like Tesla, which overtook giant GM this year in market cap—a major, unexpected feat. It’s not a one-off occurrence: Tesla’s going to maintain its momentum because they are the future. Earnings are expected next week.
Fortune Minerals (TSX:FT) is another player in the cobalt space. Operating in Canada’s Northwest Territories, Fortune is eyeing status as a major Canadian producer of battery-grade cobalt chemicals--but it’s also got copper and gold bismuth upside. And it’s getting a boost from the government in terms of mining infrastructure.
Fortune’s modest market cap and low buy in make it a great stock for investors looking to get a piece of the electric vehicle revolution. The company’s value has increased significantly over the past year but it hasn’t yet reached its peak.
Nemaska Lithium Inc. (TSE:NMX) is a smart company which realizes that lithium will be used in nearly every major tech-leap in electric vehicles and consumer products using batteries the coming years. With a looming lithium supply squeeze coming, Nemaska has a unique technology and great government support. Nemaska explores and develops hard rock lithium mining properties and related processing in Quebec.
It’s small, and its shares are trading right now under $1, but it’s the government support you should look out for. Smart investors know a good thing when they see it and will be sure to follow Nemaska in the coming years.
By Meredith Taylor
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This news release contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include that LION will complete its announced transaction to purchase the Nevada carbon exploration property; that graphite and graphene will have all applications and will be as much in demand in future as currently expected; that LION can fulfill all its obligations to exercise its Nevada property option; that LION’s Nevada property can achieve drilling and mining success for graphite; that LION will close its MOU to buy a Madagascar mining licenses; that production can go online in the near term in Madagascar; that LION will obtain drilling permits on its Nevada and Madagascar properties; that the graphite in Nevada and Madagascar when produced will be high quality suitable for the tech industry; and that LION will be able to carry out its business plans. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that the Company may not agree on the final terms for the Madagascar property, even if it agrees it may not be able to finance its acquisitions of Nevada or Madagascar, it may not get regulatory approval for these acquisitions, aspects or all of the properties’ development may not be successful, mining of the graphite may not be cost effective, LION may not raise sufficient funds to carry out its plans, changing costs for mining and processing; increased capital costs; the timing and content of upcoming work programs; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and mineral recoveries assumptions based on limited test work with further test work may not be viable; additional high value mineral properties may not be available for LION to acquire, or LION may not be able to afford them; competitors may offer better technology than graphite technology for technology; the availability of labour, equipment and markets for the products produced; and despite the current expected viability of its projects, that the minerals cannot be economically mined on its properties, or that the required permits to build and operate the envisaged mines cannot be obtained. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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