Want to invest in lithium stocks? You might consider this ETF

Lithium inventories are having a strong year, thanks in large part to optimistic growth projections for electric vehicles (EVs). Lithium is needed to make the rechargeable lithium-ion batteries that power electric vehicles, and it’s needed to produce energy storage products, another rapidly growing market.

EV pioneer actions You’re here (NASDAQ: TSLA) climbed 586% this year through November 25. While the major lithium producers haven’t been on fire to the same degree, their performance is still stellar. So far in 2020, the shares of Albemarle (NYSE: ALB), Chilean Chemicals and Mining Company, or SQM (NYSE: SQM), and Livent (NYSE: LTHM) – the three largest lithium producers listed on a major US stock exchange – reported 87%, 86% and 84% respectively. And some of the smaller players have even bigger payouts.

If you want to expose yourself to the vast lithium space, but want to spread your bets across many stocks, you may want to consider investing in the Global X Lithium & Battery Tech FNB (NYSEMKT: LIT).

Global X Lithium & Battery Tech ETF: the basics

The Global X Lithium & Battery Tech ETF “invests in the complete lithium cycle, from metal mining and refining, to battery production,” according to its prospectus. It is not an actively managed fund. Rather, it aims to monitor the performance, before costs and expenses, of the Solactive Global Lithium index. The fund’s expense ratio is 0.75% which is relatively reasonable.

The fund held 40 stocks as of November 25 and net assets of nearly $ 1.3 billion the day before. In dollar terms, 49% of holdings were based in China, 21% in the United States and 11% in South Korea, as of October 31. No other country accounts for more than 5% of total holdings. This breakdown by country reflects the considerable progress made by China in lithium and related markets in recent years.

Global X Lithium & Battery Tech FNB: Top 10 Holdings

Data sources: Global X and YCharts. YTD = year to date. N / A = Not available or does not trade based on US market capitalization and performance as of November 25; data as a percentage of weight as of November 24.

Albemarle (# 1), Ganfeng (# 3) and SQM (# 6) are lithium miners. Albemarle and SQM are not pure games, as they make a range of chemicals.

Where is Livent? The purely US-based lithium producer is the ETF’s 19th largest holding, accounting for almost 2% of the portfolio. What would you say Lithium Americas? The Canada-based lithium miner, which has no product to sell yet, is the 33rd largest holding in the fund.

BYD, the No. 2 holding company, boasts of being “the world’s largest manufacturer of electric vehicles.” It is also one of the leading manufacturers of rechargeable batteries for many applications. Warren Buffett’s Berkshire Hathaway holds a significant stake in the company.

Then number 4, Samsung SDI. It produces lithium-ion batteries for a variety of uses and manufactures electronic materials used in semiconductors and displays. It is followed by LG Chem, which is the world’s largest manufacturer of batteries for electric vehicles, and other companies.

Panasonic, the 7th holding company, manufactures electronic products for a range of consumer and industrial applications. It supplies lithium-ion batteries for electric vehicles and energy storage systems.

Tesla, No.8, has energy storage and solar energy business in addition to its high-end electric vehicles. It’s likely included in the Lithium ETF, as it produces lithium-ion batteries for its energy storage products and non-China-made vehicles at its Nevada Gigafactory. Panasonic, which supplies the battery cells, is its partner on this site.

Finally, Eve Energy and Contemporary Amperex Technology both manufacture lithium batteries.

A solid solution for some investors

The Global X Lithium & Battery Technology ETF looks like a solid option for investors who want broad exposure to the lithium space, which has been very volatile over the long term. Keep in mind that like any ETF (or mutual fund), its diversification can be both a plus and a minus.