Possibly the Most Important Metal

Hey Influence Traders,

I’m back to the cold and snow of the Northeast.

Mexico was amazing – celebrated a friend’s birthday and drank my fair share of margaritas (and perhaps a few other’s fair shares too).

Lo siento mucho!

Pre-Covid
Mexico felt almost like pre-covid … at least where we were in Tulum.

Not a lot of mask wearing and a true tourist mentality.

We did have to get tested before returning to the US, which is a great business for in room testers at Mexican hotels.

Green Business
While green vehicles have not been embraced in Mexico, Tulum certainly focuses on keeping things clean and natural.

They like natural surroundings and maintain them with a low human and carbon footprint.

I’m going to miss the natural approach.

Back to Work
I definitely didn’t miss the snow.

And I can’t say that I missed seeing the start of the next round of DC circus performances.

The impeachment is in full swing – the markets don’t seem to care and they shouldn’t.

It’s just more noise and distraction.

What I did see when I got home were a lot of Tesla’s and a lot of talk about green energy/being carbon neutral.

And I saw an opportunity.

More batteries = more lithium = more digging out of the ground.

Lithium & Cobalt
Last go around, we discussed Cobalt.

Today, we’re digging in on its partner – Lithium.

The average electric vehicle (EV) battery weighs about 1,000 pounds and requires the excavation of more than 500,000 pounds of materials.

Fun fact: About 140 pounds of a Tesla Model S battery is lithium.

While EVs account for just 3% of the U.S. car market, demand here and abroad is rising, and the demand for lithium will rise with it. GM, for example, announced last month that it will move to all-electric production by 2035.

Many lithium stocks saw great gains in 2020, but there is currently no replacement for its use in generating, storing and using energy.

So, as demand rises, we will see supply issues … which will cause the price of the commodity to rise and make lithium a solid long-term investment.

I’m keeping my eye on a few of the big producers:

Albemarle (Ticker: ALB): ALB is Charlotte, N.C.-based company that is the world’s largest maker of lithium for EV car batteries. ALB’s stock price has been volatile over the years, but it is making smart moves. It just raised over $1.2 billion from a recent stock offering to increase production, and announced that it plans to double battery production in its Nevada plant by 2025. This plan should be helped by Biden’s Buy America program. ALB will release it’s 4Q results on Feb. 17  and is expected to beat estimates.

Tesla (Ticker: TSLA): You can’t discuss EV batteries and lithium without mentioning TSLA. Yes, the stock price has gone through the roof and is probably due for a correction, but TSLA continues to impress.

The EV car market is growing and TSLA is the undoubted leader in the space. While competitors are coming onliine, no company has the brand appeal of TSLA, which will allow it to remain a dominant supplier of EV cars.

Importantly, TSLA is making gains in the U.S., not just in market share but with a reputation for providing high-paying jobs. In short, while many EV car makers talk a big game, TSLA tends to deliver on its ideas.

In addition, the pandemic showed us the downside of not controlling critical supply chains, and TSLA is responding to that threat by dipping its toe into the lithium mining business. Expect that initiative to grow.

Lithium Americas (Ticker: LAC):  LAC is a development-stage lithium mining company. LAC owns and operates the Thacker Pass lithium project in Nevada. The mine is estimated to have enough lithium reserves for a 46 year mine life at full capacity. Phase one of the mine is expected to be commissioned in 2022.

LAC will require some belief in the future of EV car needs. LAC gained 295% in 2020 and moved another 57.1% in January on good news regarding the expected commercialization of the Thacker project. It might be fun to watch for dips.

Cutting Through the Noise for You,

Frank

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