Tuesday, March 04, 2014

Why Did the Lithium Stocks Double and Triple Yesterday?

Lithium is an element that has a lot of uses, not only in batteries. It is also used in the defense industry along with rare earth metals, which some have nicknamed "war metals." With the rumblings between Russia and Ukraine, investors were looking for stocks that may spike in the event of an all out war.

A couple low cap lithium stocks really did spike. Lithium Corporation (LTUM), went fron 6 cents a share last Friday to 12 cents at the close yesterday, trading as high as 16 cents. Lithium Exploration (LEXG) jumped from 6 cents to 19 cents, tripling over the weekend.

Although lithium is technically not a rare earth metals stock, many put it in that category. Lithium, the world's lightest metal, is one of the hottest metals in the investment field, primarily due to its connection to the lithium ion batteries. About 20% of the lithium production is used for batteries, another 20% or so for producing glass and ceramics, 17% for lubrications and greases, about 9% for pharmaceuticals, and the rest for air conditioning, aluminum production, construction, pool chemicals, and alloys.

Here are some interesting facts about lithium:

1. Lithium is used in used in more than 60% of mobile phones.

2. In the 1800's, lithium salts were used to treat gout.

3. Lithium is the leading treatment for treatment of bipolar disorder due to the counteraction of both depression and mania.

4. Communities whose water contained larger amounts of lithium had significantly lower suicide rates.

5. Metallic lithium and lithium hydrides are used as high energy additives to rocket propellants.

6. Major producers of lithium include Chile, Argentina, China, Australia, Brazil, Canada, Zimbabwe and the USA.

7. Lithium deuteride was the preferred fuel in early versions of the hydrogen bomb.

8. Lithium is used in red fireworks.

10. It was used in high temperature grease for aircraft engines in World War II.

WallStreetNewsNetwork.com has come up with a list of over 25 stocks involved in the rare earth metals and lithium industry, from the mining companies to the producers of lithium ion batteries. The stocks range from microcaps to large corporations that pay dividends.

For example Sociedad Quimica y Minera (SQM), also known as Chemical & Mining Co. of Chile Inc., is the largest lithium producer in the world. This New York Stock Exchange traded company, which has a market cap of almost $8 billion, has a forward PE of 20.3 and a yield of 3.9%.

FMC Corp. (FMC) has a division based in Argentina called FMC Lithium, which owns the Salar de Hombre Muerto mine, containing 850,000 tons of reserves at up to 70 meters of depth. FMC has a forward PE of 14.2, and pays a small yield of 0.8%.

Advanced Battery Technologies, Inc. (ABAT) is one of the few lithium ion battery manufacturers generating a profit. The company, which makes rechargeable polymer lithium-ion batteries, has a PE of 1.3.

Another alternative is to invest in the Exchange Traded Fund called Global X Lithium ETF (LIT), which is designed to track the Solactive Global Lithium Index. This ETF has a PE ratio of 18 and a small yield of 0.34%.

To see a list of over 25 rare earth and lithium companies which can be downloaded, sorted, changed, and added to, go to wallstreetnewsnetwork.com.

Author does not own any of the above.

By Stockerblog.com


Urbane Gorilla said...

Most likely, Lithium stocks took off on the news that Tesla will build a massive battery plant in China...The Ukraine issue is silly. Lithium stocks don't respond to wars..If they did, why not Syria, Egypt, Libya, etc..etc.. Tesla's batteries will consume 80% of the world's available Lithium (If I recall the details correctly)..

Tesla’s alternative energy future aims for massive lithium-ion battery production http://blog.sfgate.com/inthepeninsula/2014/03/07/tesla-alternative-energy-future/

Stockerblog said...

Yes, you are right about the Tesla connection. The war connection was related to the rare earth metals stocks.