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Hot Stocks: The 3 Best Opportunities for Investing in Batteries

Lithium is a key component of electric vehicle (EV) batteries, which have surged in demand in the past few years. This demand caused some of the best battery stocks to reach record highs in late 2022. However, lithium carbonate prices have fallen more than 64% over the past twelve months. An oversupply of rare earth minerals is one of the reasons prices reached new lows in 2023. The other reason is most likely related to the slowing demand for EVs.

Still, battery stocks could make great long-term investments despite short-term slumps. These three battery stocks are the best opportunities for an investor looking to bet on batteries.

BYD (BYDDY)

Source: shutterstock.com/Trygve Finkelsen

Its almost impossible to list battery stocks without mentioning the world’s second largest EV battery supplier. BYD (OTCMKTS:BYDDY) has garnered several achievements recently. The Chinese automaker has managed to dethrone Tesla (NASDAQ:TSLA) as the world’s largest EV maker in 2023, but BYD hadn’t stop there. For those who don’t know, BYD began its business in the late 1990s supplying lithium-ion batteries to the burgeoning mobile phone market. Recently, the Chinese automaker has played a direct role in supplying battery technologies to the burgeoning electric vehicle sector. 

In the first half of last year, BYD successfully ousted LG as the world’s number two EV battery supplier. That trend continued into the latter half of 2023 with BYD maintaining its number two position.

Despite an EV market slump, BYD is likely to continue to expand its reach, not in China but abroad as well, making the stock a good bet on EV batteries. Trading at only 16.6x forward earnings only puts icing on the cake.

Albemarle (ALB)

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Albemarle (NYSE:ALB) continues to be the world’s largest lithium producer boasting a diversified portfolio of lithium assets. It includes brine operations in Chile and Argentina, hard rock mines in Australia and joint ventures in China and the U.S. Also, the company produces bromine and catalysts. This provides stable cash flows and helps offset the volatility in the lithium market.

ALB generated over $7 billion in revenue in 2022 due to elevated lithium prices. Unfortunately, in 2023, the pressure of falling lithium prices have decreased both top-line and bottom-line figures. In their Q4 2023 earnings report revenue declined by 10.1%, while EPS declined by 160%. While these estimates came above what Wall Street was predicting, markets still haven’t been kind to ALB shares. The lithium producer’s stock price has fallen more than 15% since the start of the year.

Again, this is attributed to pessimistic investor sentiment about the direction of lithium prices. Interest rates will likely begin to fall in the latter half of this year, which could incite demand for new vehicles, including, in turn leading to a rebound in lithium prices.

Toyota (TM)

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Japanese automaker Toyota (NYSE:TM) helped start the current hybrid and electric car revolution with the Prius and a growing line of EV and hybrid vehicles.

The company has also been developing solid-state batteries for over a decade. If commercially scaled, solid-state batteries could address EV battery concerns such as charging time, capacity, and the risk of catching fire.

Recently, Toyota claimed a breakthrough in battery manufacturing technology that would allow the automaker to mass-produce solid-state batteries by 2027 or 2028. With this novel battery technology, the automaker aims to achieve a range of over 1,200 km and a charging time of less than 10 minutes. Once this technology is employed, Toyota will be able to compete effectively with major EV manufacturers.

On the date of publication, Tyrik Torres did not have (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.

Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.

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