Toyota's (NYSE:TM) recent recall problems aside, the Prius has been a remarkably successful vehicle, highlighting the nations appetite for such cars. The upcoming much-hyped Chevy Volt and its rated 230 miles per gallon is just one of the slated 75 new hybrid electric models expected to make their debuts in the 2011 model year. And that number is growing. Reports from the National Highway Safety Commission estimate that nearly 20% of the United States auto market will be hybrid cars by 2015. Similar findings from J.D. Power and Associates show Europe reaching 50% hybrid saturation in the same time frame.
IN PICTURES: 6 Major Credit Card Mistakes

Storage Solutions
This surge in hybrid and plug-in automobile usage will result in one thing; storage solutions. Each of these vehicles will require some sort of rechargeable battery. Currently, nickel metal hydride (NiMH) batteries rule the roost, finding their way into the popular Prius. However, many analysts predict that old style NiMH batteries will soon be replaced outright, by lighter, better-charging lithium-ion units. Deutsche Bank (NYSE:DB) estimates that just the automotive market place for these L-ion will reach $10-15 billion in sales through 2010, dwarfing the entire market for L-ion batteries in electronic devices. This echoes the bullish stance from auto makers and the Obama administration, who handed out $2.4 billion in stimulus grants to companies involved in the engineering and design of batteries. Deutsche estimates that advances in L-ion technology could replace NiMH style systems completely by 2020.

The Portfolio Power Plays
Adding a charge of lithium stocks to a portfolio is easy, if investors skip the end manufacturers and go the pick and shovels route. Most of the larger players in the industry are either large conglomerates, in which L-ion batteries make up a small portion of revenue, and many of the pure players still represent speculative bets. By going with the miners of lithium, the component manufacturers and the companies that make the charging systems, investors can profit no matter which automotive manufacturers prevails.

Sociedad Quimica Chile Inc. (NYSE:SQM) may not look like a traditional technology play, with 77% of its revenue coming from fertilizer. Sociedad Quimica, however, is the world's largest lithium miner, holding 20% of the planet's recoverable reserves. Forecasts estimate that 200,000 tons of lithium will need to be mined in 2015, as it takes about six lbs of lithium to make one car battery. Investing in SQM gives a portfolio access to both the hybrid battery trend as well as the global need for more food. In addition, the stock rewards investors with a 1.7% dividend yield. Both Rockwood Holdings (NYSE:ROC) and FMC (NYSE:FMC) offer a way to play the mining angle.

Making both separation filters for both traditional lead acid and lithium batteries, Polypore International (NYSE:PPO) is a way to play the component angle. The company was one of the recipients of the ARRA stimulus grants, receiving $49 million in order to continue development of its filters. Polypore is bullish on its future, committing to building a new plant in Charlotte to add to its overall production.

Defense firm AeroVironment (Nasdaq:AVAV) makes most of its revenue from creating spy drones for the U.S. military and its allies, but the company does have a history of quirky projects. In this case, one has paid off in spades. Automotive producer Nissan has partnered with Aero in the creation of home vehicle charging stations for its new Leaf plug-in hybrid. The deal represents a potential pipeline of new business for AeroVironment, and the shares have rallied accordingly.

The Bottom Line
With energy conservation and efficiency becoming a top priority, the shift to more hybrid vehicles is almost assured. By playing the companies that provide the components for lithium battery systems, we can avoid the pitfalls of model popularity. The previous stocks are good examples of these pick and shovel plays in the hybrid industry. (Learn more about green tech, read: Clean Or Green Technology Investing and Special Feature: Green Investing.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing News

    Latest Labor Numbers: Good News for the Market?

    Some economic numbers are indicating that the labor market is outperforming the stock market. Should investors be bullish?
  2. Investing News

    Stocks with Big Dividend Yields: 'It's a Trap!'

    Should you seek high yielding-dividend stocks in the current investment environment?
  3. Investing News

    Should You Be Betting with Buffett Right Now?

    Following Warren Buffett's stock picks has historically been a good strategy. Is considering his biggest holdings in 2016 a good idea?
  4. Products and Investments

    Cash vs. Stocks: How to Decide Which is Best

    Is it better to keep your money in cash or is a down market a good time to buy stocks at a lower cost?
  5. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  6. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  7. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  8. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  9. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  10. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
Trading Center