Nanalyze

15 “Lithium Stocks” in the Global X Lithium ETF (LIT)

In a previous article, we took a look at the 3 companies that produce 90% of the world’s lithium. In that article, we noted that there is actually a lithium ETF called the “Global X Lithium ETF” which trades under the ticker LIT. This ETF just hasn’t performed that well over time as seen in the below chart:

LIT_Performance

The Global X Lithium ETF is based on the “Solactive Global Lithium Index”. This index provider publishes an up-to-date fact sheet which gives us the weightings and names of the top 15 stocks in the index which make up 94.54% of the total portfolio weighting. Let’s take a look at all 15 of these stocks.

Lithium Miners – 35.49%
The first three constituents which carry the heaviest weightings are the 3 lithium mining companies we covered in a previous article; Albemarle, FMC, and SQM. In that article, we noted that these while these 3 companies produce 90% of the world’s lithium, all 3 stocks were far from pure plays since lithium sales made up such a small percentage of total revenues for each company.

Lithium Battery Manufacturers – 26.95%
Panasonic, Saft Groupe, Simplo, Dynapack International, and FDG Electric Vehicles are all companies that manufacture lithium batteries.  If the price of lithium falls, these companies will benefit from cheaper raw materials.  If you’re bullish on the price of lithium, then you would expect these companies to incur increased costs since they cannot hedge the cost lithium because it isn’t traded on any market. If lithium goes up, these stocks go down all things being equal. However, if you’re bullish on the growth of lithium batteries, these companies are worth a look.

Electric Vehicle Companies – 6.41%
Tesla sells electric cars as we all know. If the price of lithium falls, Tesla can buy cheaper inputs for their lithium batteries and make more profits as a result. This is negatively correlated to the price of lithium and not a good play if you are bullish on lithium, not to mention that lithium is just one of the many inputs Tesla needs to build their electric vehicles.

Other Companies – 25.8%
Johnson Controls
 is a $26 billion dollar company which operates in three segments; Building Efficiency, Automotive Experience and Power Solutions which supplies lead-acid automotive batteries. It’s hard to see how this company is a play on lithium. LG Chem is a $12.7 billion Korean company principally engaged in the manufacture of petrochemicals. Again, nothing to see here in respect to a play on lithium. GS Yuasa Corporation is a $1.5 billion Japanese company that manufactures batteries and power supply devices. The Company sells alkali batteries, lead batteries, and lithium batteries. As we noted earlier, companies that use lithium as an input are negatively correlated to the price of lithium. The same holds true for Samsung SDI Co which manufactures plasma displays and is said to be the world’s largest supplier of lithium batteries. BYD Company is a $16 billion dollar Hong Kong company which manufactures secondary rechargeable batteries for automobiles and mobile phone components. Advanced Lithium Electrochemistry is a Taiwanese company that manufactures cathode materials and electric buses. 

All 15 of those companies make up 94.54% of LIT. After evaluating these 15 “lithium stocks”, there don’t appear to be any pure plays on lithium.  Some of the companies are so far removed from lithium that it’s difficult to make the connection and a fair number of these companies actually appear to be negatively correlated to the price of lithium. If you’re bullish on the price of lithium, LIT doesn’t look like a good vehicle through which to test your thesis.

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  • David Montrose

    Don’t disagree with your conclusions. Just for information so far as concerns LG Chem, see http://www.lgchem.com/global/lg-chem-company/information-center/press-release/news-detail-659

    • Nanalyze

      Thank you for that piece of information David! It does look like LG Chem is involved in lithium after all.

  • Ryan

    So, after all of your research into Lithium stocks, if you were going to make just one lithium investment to hold for the next 10 years to proxy the price of the lithium commodity, what would it be?

    • Nanalyze

      That’s a very good question Ryan. Whatever investment we would make, it would have to be diversified one. While we’re bullish on the price of lithium like everyone else, we don’t see any viable means of investing here. There just doesn’t seem to be any vehicle that acts as a proxy for the price of lithium. If we had to make an investment, we’d buy a motif containing the 3 biggest producers of lithium as detailed in the below article.

      https://www.nanalyze.com/2015/08/dont-invest-in-lithium-mining-companies/

      We did create that motif and are tracking it, but didn’t invest in it. It’s down 1% since we created it.

  • David fisher

    What is your view on Nemaska Lithium (NMX TSX Venture) with regard to their new property in
    Quebec?

  • raanan

    there is nohing rong with the correlaion issue the etf reflects incresing demends for
    Lithium producs/tec
    if the Lithium is up its because those companies makes money .
    about the play pure maybe it is not worthwhile for 10 billion company
    to deal with

    • Nanalyze

      You have to speak proper English to get your point across mate.

      • raanan

        frankly, this page is too old there is no across here just me and you

  • Tom

    Ummm…thank you for that analysis. You saved me money, and time.

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