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Cobalt is a metal that is often overlooked by investors who are looking to get in on the next materials bull market - but it shouldn't be. Demand for cobalt is increasing dramatically because of its important role in lithium-ion batteries, which are used in products like iPhones and tablets and are also a vital component of electric vehicles (EVs).
The price of cobalt sulphate increased 78% last year in China as the EV market began to expand in the world's largest economy. Prices have flattened out this year, but I expect the pause in the rally will be short lived.
Simple economics will lead to higher cobalt prices in the future. While demand for the metal is increasing for both electronics and EVs, the industry is facing a very tight supply issue. About 60% of the world's cobalt is in the Democratic Republic of Congo (DRC), which is a country that is very unstable right now.
There are a bevy of stocks to consider in the cobalt space, but the biggest issue here is that most pure plays are small and risky while the larger names also have exposure to other industrial metals. My research has uncovered three worth keeping a closer eye on, and I wanted to dive a bit deeper into each.
A Swiss mining giant with a market cap of $58 billion, Glencore PLC (OTCMKTS: GLNCY ) produces more cobalt than any other company in the world. Naturally, it's the biggest player in the DRC.
The pullback in the price of industrial metals combined with a rise in the U.S. dollar has hurt the mining conglomerate, and as a result the stock is now trading with a P/E ratio of around 10. But on the other hand, the dividend yield has increased to a strong 4%-plus.
With the shares in the process of coming off their yearly lows, GLNCY is an interesting long-term value play.
Umicore Group (OTCMKTS: UMICY ) is a $14 billion Belgian company focuses on materials, technology and recycling. That may seem like an odd combination at first glance, but it's actually fairly straightforward. UMICY takes metals, transforms them and then remarkets them. Cobalt is one of these metals.
This company is well positioned to be a major player in the cobalt and lithium business, and it already has strong ties to automotive manufacturers.
UMICY has been slowly trending higher over the years, but the rally slowed down in 2018 and the stock recently fell to its 200-day moving average (the blue line) for the first time since April 2017. That weakness looks like an attractive opportunity, as I expect the long-term uptrend to resume.
China Molybdenum (CMCLF)
China Molybdenum (OTCMKTS: CMCLF ) is a $12.4 billion company that is partly owned by the Chinese government. As I mentioned, China is a leader in the electric vehicles market, and this company gives it a direct link to the highly sought-after metal - CMCLF owns the majority of the Tenke Fungurume mine in the DRC, which has one of the largest deposits of cobalt in the world.
The stock has struggled in 2018 and recently hit a yearly low. However, the company's financials are improving, and over time I expect to see higher prices. This could turn into a deep value play, so it's definitely a stock worth keeping on your radar.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world's biggest, most revolutionary trends BEFORE anyone else. The power of being "first" gave Matt's readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you're interested in making triple-digit gains from the world's biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today .Compare Brokers
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