By Andrey Dashkov, analyst, Casey Research
The market is noisy, but you’re better off ignoring most of it.
Why?
If you pay too much attention to the day-to-day movements of broad-based indexes, like the S&P 500, you might miss the trends that are unfolding.
… Like the “tech metals” boom that’s still in its early stages.
And one metal stays a top-performer in this group…
If this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.
I’m Andrey Dashkov, and I’ve been a Casey Research analyst for over 11 years. Incredible investing minds like Nick Giambruno… Louis James… Doug Casey… and Dave Forest have all helped shape my writing and thinking.
I’ve learned a lot over the years – including how to make huge gains from smart speculations…
This time, I’ll tell you about a megatrend that continues despite market jitters… and how to profit from it.
Lithium Remains King of Tech Metals
As a reminder, “tech metals” go into technology products, like electric vehicles (EVs) and electronics.
These commodities are the backbone of the “green transition” that the world is going through right now.
Regular readers may recall that we believe this trend isn’t going anywhere.
Lithium is the go-to commodity for investors who want to get exposure… and its price shows that.
Battery-grade lithium has been up over 446% over the past 12 months.
For context, the S&P 500 was up just 12.4%.
Better yet, this year, lithium has performed extremely well as broad-based indexes have fallen.
As of writing, battery-grade lithium appreciated by 34% year-to-date.
The S&P 500, meanwhile, dropped by 9%.
The price action in the chart shows that, so far this year, betting on “broad markets” has not delivered great returns.
Use this as a chance to review your portfolio… and add some exposure to “tech metals,” like lithium.
But there are more reasons to embrace tech metals besides lithium’s performance…
After all, past performance doesn’t ensure future results.
There must be underlying reasons to invest in a trend.
And for lithium in particular, the reasons are strong…
Lithium Is a Key Element in Batteries
First, battery demand is soaring, and producers are scrambling to keep up.
As a reminder, lithium is a huge input in batteries for EVs… smartphones… and a range of other consumer electronics.
Bloomberg estimates that 5.6 million EVs sold in 2021, up 81% from 2020.
This year, the demand will continue to grow. Fitch points to 7.8 million EVs sold globally this year. That’s a 39% increase from 2021.
Bloomberg estimates that total lithium demand will also grow by about 40% in 2022.
What to Do
Lithium producers are finding it hard to catch up…
Even though they increased capacity and made some progress on mine expansions, they are facing problems that get in the way of the supply-demand balance.
And lithium inventories are running low…
This is a bullish sign for lithium’s price because producers can’t keep up with demand.
Supply chain disruptions, mine closures due to COVID, and staffing problems add to the supply concerns.
In other words, lithium’s prices are the result of market factors that will continue driving the metal’s price higher this year.
To profit, consider using the weakness in the markets to get exposure to lithium companies on the cheap.
An ETF (exchanged-traded fund) like the Global X Lithium & Battery Tech ETF (LIT) is a good place to start.
It holds a portfolio of companies involved in lithium mining, refinement, and battery production.
Good investing,
Andrey Dashkov
Analyst, Casey Research