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Martin Tillier

Martin Tillier

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The Best Long-Term Buy In Lithium

As a rule, I don’t like well-publicized, obvious trades, and for one good reason. By the time you get to them, the value has already gone, and the all-important risk/reward ratio is usually skewed against you. The last thing any trader wants to be is the last one in on a move. Occasionally, though, there is an opportunity with a well-known, clear rationale that still makes sense. The mining company Albermarle (ALB) is a case in point.

(Click to enlarge)

The reason that buying ALB is obvious is what ties it in with energy, they are the world’s largest producer of lithium, with around thirty-five percent of total global production. In case you hadn’t heard, lithium ion batteries are what power electric vehicles (EVs) and, surprise, surprise, they need lithium, so miners of the mineral are obviously in a good place to benefit from the shift towards EVs.

One would think that with a bull case as obvious as that, ALB would be trading at ridiculously high P/Es, an assumption supported by the chart above that shows around a fifty percent increase in the stock this year. One would, however, be wrong in that assumption. The stock has a trailing P/E of 16.7, below the Dow’s average of around 21, and a forward multiple of 25, which is above the Dow’s 19.93, but hardly overdone in the circumstances, and those circumstances are pretty persuasive.

In a very short period of time, EVs have gone from a niche market for small vehicle…




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