While everyone’s eyes are glued to the headline-grabbing electric vehicle manufacturers, truly savvy investors might find more promise in overlooked lithium stocks to buy. As the electrification wave becomes increasingly undeniable, turning to these unsung heroes offers a potentially discounted ticket into a crucially pertinent industry.
Unlike brand-specific entities, overlooked lithium stocks have a near “evergreen” appeal. Here’s a sobering thought: an EV brand making waves today might not even exist a decade down the line. However, the underlying commodities market shows no signs of slowing. As more vehicles shift away from gasoline to batteries, lithium demand will exponentially grow, cementing its enduring significance.
Moreover, the dynamics around overlooked lithium stocks extend beyond just demand. Supply-side considerations bring geopolitical dynamics into the mix. Lithium isn’t boundlessly available; it’s a resource that various nations are vying for, and the geopolitics of lithium extraction and trade are set to be as significant as oil politics in the 20th century.
Hence, delving into overlooked lithium stocks not only aligns with technological progress but potentially insulates investors against international trade complexities. Let’s shed light on some lithium contenders that might not be on everyone’s radar but certainly deserve to be.
Rio Tinto (RIO)
One of the world’s largest mining and metals enterprises, Rio Tinto (NYSE:RIO) might not immediately seem like one of the overlooked lithium stocks to buy. Frankly, with its market capitalization of nearly $107 billion, it’s hard to look past it. Still, it might not garner as much attention as other lithium players because it’s not a pure-play investment.
Instead, Rio mines various commodities, including iron ore and aluminum. However, over the next several years, RIO should be relevant for its ties to the EV industry. Extracting metals such as copper and lithium, it should play a vital role in the electrification of transportation and mobility. Best of all, as a giant among giants, it’s probably not going anywhere.
In other words, you can grow with Rio Tinto. Additionally, it features overall solid financials, especially its net margin of 16.34% which beats out almost 83% of its peers. Finally, analysts peg RIO as a strong buy with a $72.75 forecast, implying over 14% upside potential.
Sigma Lithium (SGML)
Source: Olivier Le Moal/ShutterStock.com
Headquartered in Vancouver, British Columbia, Sigma Lithium (NASDAQ:SGML) offers high-purity green and sustainable lithium, according to its website. As well, the company claims to source this vital metal responsibly. Primarily focused on its project in Brazil, the region – located in the state of Minas Gerais – is historically known for its mining operations. As a result, it has infrastructure in place to support mining activities.
Since the beginning of this year, SGML gained nearly 41% of its equity value, making it one of the top performers among overlooked lithium stocks to buy. Of course, based on performance, SGML appears to be getting its dues. However, it’s just not as popular as more established plays. To be sure, the company presents high risks, including a high debt load due to the capital-intensive nature of lithium mining. Nevertheless, SGML trades at only 7.08X forward earnings, lower than the sector median of 9.99x.
Lastly, SGML is a unanimous strong buy with a $48.05 target, implying almost 35% upside.
Piedmont Lithium (PLL)
Source: T. Schneider / Shutterstock.com
One of the most speculative ideas among overlooked lithium stocks to buy, Piedmont Lithium (NASDAQ:PLL) should not be entered into lightly. However, for speculators, PLL presents an awfully enticing profile. Based on its website, the company is developing a world-class integrated lithium business in the U.S. Primarily, it aims to facilitate the transition to a net-zero emissions world.
Still, I must remind prospective participants that Piedmont presents a worrying profile. Since the start of the year, shares slipped 9% but that’s not the worst of it. Rather, it’s been sharply accelerating in a negative direction. Just in the past five sessions, PLL gave up more than 14% of market value. Again, only hardened gamblers need to apply. Looking at its valuation, its forward multiple of 0.08x seems, well, too good to be true. To its credit, as of its most recent quarter, Piedmont’s balance sheet shows zero debt.
Now for the good part: analysts peg PLL as a moderate buy with a $90 price target, implying 131% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
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