Re-rate in lithium stocks is imminent, Ausbil says
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Investors looking for the best near term exposure to the electric vehicle thematic should choose lithium stocks, says Aussie investment fund manager Ausbil.
The main winners of the forthcoming electric vehicle boom — in terms of commodity volume growth — are likely to be lithium, nickel and cobalt stocks (and potentially manganese), says James Stewart, resources portfolio manager at Ausbil Investment Management.
But pure-play cobalt companies are hard to find globally, and the nickel market is currently dominated by stainless steel demand.
That leaves lithium as the best opportunity to leverage the EV thematic over the short term.
“Anecdotally, lithium producers are suggesting pricing has increased slightly in recent weeks and months, and demand from customers has stabilised and is increasing,” Stewart says.
“Ultimately, we believe an increase in the lithium price will see a re-rate in lithium equities.
“However, given the nature of the market we believe equities will likely rally well ahead of reported price increases in the commodity market.
With delays in new project construction, we could see a market reminiscent of 2017, where EV and battery makers scramble for product as the market tightens, driving commodity and equity markets higher, Stewart says.
“As such, we have positioned the Ausbil Global Resources Fund long in lithium, leading into expected price increases in Q4 CY2020 and Q1 CY2021.
Lithium explorers and miners, the ones that continued to progress their projects during the ‘dark days’, are now in a pretty good spot.
Here’s how a basket of ASX stocks with exposure to lithium are performing>>>
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