Most investors thinking about the rapidly growing electrification trend think first of electric vehicle (EV) stocks. Whether it be You’re here (NASDAQ:TSLA) or another major player, EV stocks are a must for many investors. That said, I would argue that battery stocks may be the best way to gain exposure to the electrification trend right now.
Battery technology is continually improving and will be a driving force behind the range and functionality that users expect from their electric vehicles. As new batteries are developed and greater user adoption is seen in this space, battery stocks should benefit more steadily from these strong secular tailwinds.
Yes, there are issues investors need to consider. A lack of charging infrastructure means adoption hasn’t been as high as many had expected. That said, longer lasting and more powerful batteries could alleviate range anxiety issues. This is one of the main reasons many auto buyers stick with internal combustion engine vehicles.
With increasing energy demand, it is expected that by 2030 the world will need around 3.3 TWh of battery capacity. With strong growth expected in the electric vehicle sector, battery stocks should offer some of the best returns for investors looking to play this trend.
Here are three of the best battery stocks that I think are worth buying right now.
Last month was exceptionally good for the famous battery manufacturer panasonic (OTCMKTS:PCRFY). This is mainly due to the company’s strong earnings, which saw its revenue significantly beat expectations.
As the main supplier of a significant portion of all electric vehicle batteries on the market, including leading electric vehicle maker Tesla, Panasonic is perhaps the best way for long-term investors to play on growth. of this sector. Notably, the company holds more than 9% of the global electric vehicle battery market share.
Today, Tesla announced plans to produce more batteries in-house. Those plans have been delayed and Panasonic remains more important than ever to this EV drive. However, it’s also clear that other competitors are popping up all over the place, looking to eat Tesla’s lunch. As long as Panasonic is able to maintain its status as the industry leader in electric vehicle batteries, it is a company that I believe has a long streak of long-term growth.
Panasonic has also been extremely keen on aggressive expansion. This means that the company will continue to invest its abundant cash flow in its growth, offering much better long-term returns to investors. Panasonic is already building a factory in Kansas. Another plant should be installed soon in Oklahoma.
One of the leaders in the development of solid-state batteries, QuantumScape (NYSE:QS) is a title I’ve been watching for a while. In terms of battery stocks that could be said to have malfunctioned, the QS stock certainly fits that list.
That said, this is a company that has proven to perform very well during bull markets. There is enormous growth potential for solid-state batteries compared to existing technology.
Now down about 80% from its peak, this stock is definitely worth buying from a valuation perspective. The risk-reward with such a title is much better. However, there is always the potential for another 80% downside from here (this is how value traps work).
That said, if QuantumScape is able to produce large-scale solid-state batteries, it’s a business with truly unthinkable benefits. QS is a more speculative bet on this list. For those optimistic about the future of battery technology, this is a way to essentially get a call option on solid-state batteries at these levels.
Lithium Americas (LAC)
An easier way to take advantage of the impressive growth that battery companies can offer is to invest in the underlying inputs of those batteries. Among the companies in this lithium mining space, Lithium Americas (NYSE:LAKE) remains one of my top picks right now.
Currently, the vast majority of all batteries produced for electric vehicles and most other electrified segments of the economy are lithium-ion. As the demand for lithium-ion batteries continues to grow exponentially, the raw materials needed to support continued battery development will become increasingly scarce.
The good news for investors is that Lithium Americas is one of the world leaders in lithium mining. In addition to owning mines in Argentina, the company has an impressive Thacker Pass mine in Nevada which will be a major supplier of lithium to domestic markets in the future.
Given the current geopolitical environment and the fact that most of the industrial-grade lithium produced comes from China, this relocation of production is politically excellent. When it comes to companies with a moat in the lithium mining space, Lithium Americas is a great way to build a long-term position at those lower levels.
As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.
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