3 Lithium Stocks to Buy and Hold Forever: January 2024

Stocks to buy

The plunge in lithium prices is a golden opportunity to consider the best lithium stocks to buy and hold. In my view, lithium is poised to surge higher in the coming years and this will translate into multibagger returns from lithium stocks. The best time to buy is when sentiments are depressed than in times of euphoria.

It’s worth noting that the global demand for lithium batteries is likely to surge five-folds by 2030. This forms a basis for a bullish outlook for lithium. Governments globally are backing the adoption of electric vehicles and sustained growth in demand seems likely. I must add here that studies indicate that the lithium supply-gap is likely to be acute by 2035 (24% less than the demand).

I would therefore ignore the near-term headwinds for lithium stocks and buy the fundamentally attractive stories. Given the impending supply-gap, lithium will be trading at new highs in the next few years. Let’s discuss three lithium stocks that are worth accumulating around current levels.

Albemarle Corporation (ALB)

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Albemarle Corporation (NYSE:ALB) stock has corrected by 54% in the last 12 months on the back of plunging lithium prices. However, at current levels, it’s among the lithium stocks to buy and hold. To put things into perspective, ALB stock trades at a forward price-earnings ratio of 5.7 and offers a dividend yield of 1.31%. The downside seems capped and the upside potential is significant once lithium trends higher.

I like Albemarle from a fundamental perspective with the Company having a strong balance sheet to navigate challenging times. As of Q3 2023, the Company reported $3.1 billion in liquidity buffer and had a low leverage of 0.4. It’s also worth noting that even with depressed lithium price, the Company has guided for operating cash flow of $600 to $800 million for 2023.

In terms of expansion plans, Albemarle reported lithium conversion capacity of 200ktpa in 2022. The Company has guided for capacity expansion to 500ktpa to 600ktpa by 2027. This will have a significant impact on revenue and cash flows once lithium trends higher.

Lithium Americas (LAC)

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Lithium Americas (NYSE:LAC) is another massively undervalued lithium stock to buy and hold forever. For year-to-date 2024, LAC stock has witnessed a sharp correction of 26%. This is purely on the back of a gloomy outlook for lithium. However, the markets are missing the fact that Lithium Americas has a prized asset. Once the bull market is back for lithium, I see 5x to 10x returns from current levels.

As an overview, Lithium Americas has a market valuation of $740 million. In comparison, the Company’s Thacker Pass project has an after-tax net present value of $5.7 billion. Of course, the value of the asset only makes sense when it’s monetized. I believe that the progress is smooth on that front. First, Thacker Pass is the only full permitted lithium project in the U.S. 

Further, in an important development last year, General Motors (NYSE:GM) committed to infuse $650 million in the Thacker Pass project in two tranches. GM also has a committed offtake agreement for 100% of phase one production for ten years. This agreement provides clear revenue visibility once the project is commercialized. Additionally, with a mine life of 40 years, Lithium Americas has long term cash flow visibility.

Standard Lithium (SLI)

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Standard Lithium (NYSE:SLI) stock trades at $1.2 and the Company has a market valuation of $240 million. I would however be interested in this Company considering the potential the assets hold in the next five years.

As an overview, the Company’s South West Arkansas project has a base-case production estimate of 30,000tpa of battery quality lithium. Further, the project has an after-tax base case net present value of $4.5 billion. The Company is already working towards the Definitive Feasibility Study and Front-End Engineering and Design services for the project. Additionally, the Lanxess project has an after-tax net present value of $722 million.

I believe that there are two reasons for the stock being massively undervalued. First, the big plunge in lithium prices. Further, Standard Lithium needs to find a partner for co-development or financing the South West Arkansas project. The asset would require $1.27 billion in capital expenditure. Once there is a clear financing agreement, SLI stock will skyrocket.

On the date of publication, Faisal Humayun did not hold (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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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