In this article, we will take a look at the 12 Biggest Lithium Stocks to Buy According to Hedge Funds.
Lithium is a soft, silver-white alkali metal that has become a cornerstone of the clean revolution. Its commonly used form, lithium carbonate, is required for the production of lithium-ion batteries. These power a variety of technologies, including vast renewable energy storage systems and electric vehicles (EV), making them nearly indispensable in the development of sustainable energy solutions. Although EVs have been available for a while, it wasn’t until recent technology breakthroughs and cost reductions that they became a more reliable option for consumers, resulting in an increase in lithium demand. The International Energy Agency states that the demand for lithium will climb by over 40 times between 2020 and 2040, particularly for use in battery storage and electric cars. As per Fortune Business Insights, the global lithium market achieved a valuation of $22.19 billion in 2023 and is expected to reach $134.02 billion by 2032, reflecting a CAGR of 22.1%.
According to a McKinsey report, the global drive to net-zero will depend on guaranteeing a consistent supply of essential battery raw materials, especially as demand for EVs climbs toward the latter of this decade. Based on the report, the global market for BEV passenger cars is expected to increase sixfold between 2021 and 2030, with yearly sales rising from 4.5 million to almost 28 million units during that time. In addition, such a forecast indicates that the sector is “likely to confront persistent long-term challenges” in line with demand. McKinsey also states that 80% of all lithium mined now is used by battery manufacturers, and by 2030, that number may rise to 95%.
On the other hand, analysts predict increased volatility in lithium carbonate in 2024, following a challenging year in which the metal’s price plunged 22% due to a global supply glut. However, some balance is expected to recover. S&P Global predicts that as production cuts begin to reduce excess supply, lithium surplus would fall to 33,000 metric tons in 2025 from 84,000 metric tons in 2024. According to Chris Berry, president of House Mountain Partners, however, the behavior of the lithium price over the next year may be unpredictable. He said the following:
“Lithium price volatility is a feature of the energy transition and not a bug. You have a small but fast-growing market, opaque pricing, legislation designed to rapidly build critical infrastructure underpinned by lithium and other metals, and this is a recipe for boom-and-bust cycles demonstrated by extremely high and extremely low pricing.”
Photo by Mika Baumeister on Unsplash
Our Methodology
For our list of the 12 biggest lithium stocks to buy, we narrowed down companies involved in lithium mining and supply, lithium-ion battery sales, or technologies related to battery operations. The names on this list are ranked in ascending order according to the hedge fund sentiments surrounding them, using data from Insider Monkey’s Q3 2024 database.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12. Lithium Americas Corp. (NYSE:LAC)
Number of Hedge Fund Holders: 10
Lithium Americas Corp. (NYSE:LAC) is a Canadian mining company focused on extracting lithium from pegmatite and spodumene ores in Argentina and the United States. The Thacker Pass project in Nevada’s McDermitt Caldera, which contains the world’s largest measured lithium deposits, is the company’s primary focus.
Stifel analysts maintained their $8.50 price target and buy rating on Lithium Americas Corp. (NYSE:LAC) on January 8. Lithium Americas reported a 277% increase in lithium carbonate equivalent (LCE) to 44.5 million metric tons (MMt). At Thacker Pass, the company also announced an expanded project scope, which is expected to quadruple total production to 160,000 metric tons per annum (ktpa) LCE. Thacker Pass’s expanded scope is likely to increase its strategic value to both domestic industry participants and governmental organizations in the long run. This is especially important as the United States seeks to strengthen its critical mineral supply chain in the face of increasing Chinese pressure.
11. Sociedad Química y Minera de Chile S.A. (NYSE:SQM)
Number of Hedge Fund Holders: 12
Chilean chemical company Sociedad Química y Minera de Chile S.A. (NYSE:SQM) manufactures industrial chemicals, iodine, lithium, and plant nutrients. SQM, one of the world’s largest lithium producers, relies primarily on the Atacama Desert’s abundant natural resources, which include the Tarapacá and Antofagasta regions.
Citi revised its outlook for Sociedad Química y Minera de Chile S.A. (NYSE:SQM) back in December, lowering the price target from $64 to $60 while maintaining a Buy rating. The updated price target accounts for the company’s expected 55% year-over-year decline in EBITDA in 2024, with average lithium prices forecast at $11,000 per ton, despite optimism about demand and production. Nonetheless, Citi expects a 22% year-over-year increase in EBITDA in 2025, driven by increased lithium sales volumes and a modest 10% price increase.
Although revenue met expectations at $1.08 billion, SQM reported adjusted earnings per share of $0.46 in the third quarter, $0.17 lower than the analyst consensus of $0.63. The company also reported $3.46 billion in total revenues for the first nine months of 2024, a significant decrease from the $6.16 billion recorded in the same period last year. Moreover, due to oversupply pressures, the company reported that average realized lithium prices fell 24% since Q2 2024, despite an 18% year-over-year increase in lithium sales volumes to more than 51,000 metric tons.
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