If the rise of
Tesla Motors (
has taught us anything over the past year, it is that electric cars
have finally overcome broad consumer stigma, and are worth
consideration over gas-powered automobiles. Tesla Motors has made a
splash with its cool cars, and a number of other, larger car
companies have announced vehicles of their own to tap into this
quickly growing market as well.
While this trend has obviously been great news for shareholders of
TSLA, the movement of the industry could end up being a long term
bullish case for the lithium sector as well. That is because
lithium ion batteries are at the heart of the electric car
revolution, meaning that both producers/miners of the element, as
well as those that make and sell the final battery product, could
benefit from this trend.
In fact, while electric vehicles accounted for just 6% of total
lithium consumption in 2012 at 1.4 million units, the total is
expected to rise
to 3.8 million units by 2020
. Furthermore, the broad 'automotive' category of the lithium
battery market accounts for roughly 36% of the space today, but is
expected to see annualized growth
rates of 37%
over the next three years, suggesting it will become an
increasingly important component of lithium demand (also read
3 Hot Sector ETFs Surging to #1 Ranks
Add this in to other categories of lithium battery users-such as
alternative energy, cell phones, etc.-and it is pretty easy to see
why lithium demand may soar in the years ahead. Given this trend, a
broad play on the space may be an excellent, and often overlooked,
idea for long-term investors. Fortunately, there is one way to
target this space from a global perspective, the
Global X Lithium ETF (
, which we have described in greater detail below:
Lithium ETF in Focus
LIT gives investors exposure to a broad range of firms engaged in
the mining of lithium, or the development of lithium batteries.
This is done by tracking the Solactive Global Lithium Index, giving
access to 16 companies from around the globe.
Top holdings include
FMC Corp (
Rockwood Holdings (
, two American firms which combine to make up nearly 36% of assets.
Rounding out the top five are some international firms, with
Orocobre, Coslight Technology, and Sociedad Quimica y Minera de
Chile taking up the spots (see
all the materials ETFs
From a country perspective, the U.S. takes up about 40% of assets,
followed by South Korea at 13%, Australia (11%), and Canada (9%).
Mid and small cap stocks dominate the portfolio from a cap
perspective, while materials stocks lead the way in terms of
In terms of performance, LIT has had a sluggish 2013 as the ETF has
lost a bit over 13% in the YTD time frame. Still, in the past
month, it is up over 11% while the three month return is more than
6.6%, suggesting that perception finally might be turning regarding
This product, like many commodity-heavy ones, has struggled for
much of 2013, facing some severe losses to open up the year.
However, the ETF has come back a bit as of late, producing some
decent returns in the process (see
the top ranked ETFs
The real potential here is in the long term, as lithium ion battery
demand is projected to soar in the coming years. Should this come
to pass (and given the growth prospects for electric cars it
should), investors may have an ETF worth a closer look on their
hands with Global X's LIT.
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Author is long LIT
FMC CORP (FMC): Free Stock Analysis Report
GLBL-X LITHIUM (LIT): ETF Research Reports
ROCKWOOD HLDGS (ROC): Free Stock Analysis
SOC QUIMICA MIN (SQM): Free Stock Analysis
TESLA MOTORS (TSLA): Free Stock Analysis Report
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