We recently compiled a list of the 10 Best Lithium and Battery Stocks to Buy Now. In this article, we are going to take a look at where Rio Tinto Group (NYSE:RIO) stands against the other lithium and battery stocks.
The pivotal role that lithium is playing in the market of batteries, solar panels, and chemicals has resulted in a surge in its global demand, and as such, the lithium market has seen quite a growth in recent years; the market is set to grow from $8.8 billion market size in 2023 to hit $28.45 billion mark in 2033, boasting a CAGR of 12.5%, according to Precedence Research.
On the other hand, the global electric vehicles market size is set to reach $1.579 trillion by 2030 from its market size of $500.48 billion in 2023. This is so because of improved fuel economy and costs, and more importantly, reduced emissions from electric vehicles. Furthermore, according to the International Energy Agency’s (IEA) forecast, global electric car sales are set to grow to 17 million by the end of 2024 from its sales volume of almost 14 million in 2023, 95% of which belonged to China, U.S. and Europe; 65% of new electric cars’ registrations were made in China in 2023, while 25% and 10% registrations were made in Europe and China, respectively! On the back of this, lithium demand and hence, consumption, is set to soar 16% per annum to help it grow from 1,219kt lithium carbonate equivalent (LCE) in 2024 to 2,261kt LCE in 2029, according to Techopedia.
The EV batteries market, 95% of whose growth is accounted for by the electric cars market, saw its demand growing 40% in 2023 in relation to the 2022 demand level, wherein, it grew to 750 GWh. Regions like China, Europe, and the U.S. are again, the fastest growing in terms of EV battery sales as well, as the EV battery market reached 415 GWh, 185 GWh, and 100 GWh in the three regions, respectively, according to IEA.
In terms of regions that are topping the charts of lithium production, Australia, Chile, and China are the top three countries, with their 2023 mine productions standing at levels of 86,000 MT, 44,000 MT, and 33,000 MT, respectively. China, which has relied a lot on lithium imports, found a million metric ton lithium reserve in its province of Sichuan in January 2024.
However, lithium and EV battery industries have been experiencing a downhill in 2024 in terms of raw material prices, wherein, the excess supply has resulted in a fall in various battery metals’ prices, resulting in a reduction in EV prices as well. The average price of an EV in the U.S. saw a downtick of 24.2% in December 2023, as compared to its peak price in the second quarter of 2022. This is on the back of a drop in prices of the highest-cost metals – lithium and nickel. Lithium carbonate ended 2023 at the price level of $13,575 per metric ton, falling 80.9% as compared to its 2023 high, and 81.4% in relation to its 2022 high. Nickel, on the other hand, saw its price falling 47.3% from its 2023 high, ending 2023 at $16,375 per ton.
Methodology
We created this list of 10 Best Lithium and Battery Stocks to Buy Now by listing down companies that operate within the broader market of metals, pertaining specifically to areas of lithium mining, battery sales, and tech relating to batteries. Then, we narrowed down the companies, with their respective upside potential and then ranked the stocks on the number of hedge fund investors in the respective stocks, as of Q1, 2024, using Insider Monkey’s database that tracks 920 hedge funds.
For stocks with an equal number of hedge fund holders, we used their upside potential as the tiebreaker. With this, we now present to you our list of 10 Best Lithium and Battery Stocks to Buy Now.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of an open pit mine, with workers extracting minerals.
Rio Tinto Group (NYSE:RIO)
Number of hedge fund investors: 37
Rio Tinto Group (NYSE:RIO) has its foot in 35 countries to consolidate its place in the minerals mining market, focusing on critical minerals like copper, aluminum, iron ore, and lithium.
The popularity of the stock has grown in the last 6 months; as of 31 December 2023, 34 hedge fund investors had held a stake in the stock; however, as of 31 March 2024, the number of hedge fund investors has increased to 37! Furthermore, the analysts have set hopes high for the stock, as they see the stock realizing an upside potential of 24.6%, rising from its current price of $65.8 to a price target of $82.
Although lower prices of aluminum and other minerals resulted in a decrease in its full-year 2023 underlying earnings from $13.4 billion in 2022 to $11.8 billion, the company ended up declaring a final dividend of 258 cents per share, which was more than the analysts’ estimate. Below you can see what the company’s CFO had to say about their full-year performance:
“There is significant value remaining to be unlocked from our existing assets. On a net-net basis, our underlying EBITDA declined 9% to $23.9 billion. Cash flow from operations remained strong at $15.2 billion, but we do need to bring down inventory. Free cash flow was $7.7 billion after capital expenditure of $7.1 billion. Following dividends paid and funding of the Matalco transaction for just over $700 million, we ended the year with net debt of $4.2 billion, virtually unchanged from 2022. Overall, we delivered a healthy return on capital employed of 20% on underlying earnings of $11.8 billion. This underpinned our decision to continue our eight-year record of declaring a 60% payout on the ordinary dividend, equating to $7.1 billion.”
Overall RIO ranks 2nd on our list of the best lithium and battery stocks to buy. You can visit 10 Best Lithium and Battery Stocks to Buy Now to see the other lithium and battery stocks that are on hedge funds’ radar. While we acknowledge the potential of RIO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RIO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.