As the world implements new green energy policies to battle rising fossil fuel costs as well as global warming, there will be a number of winners in the stock market. One trend will be more electric cars on the road, especially in emerging markets such as China.
According to studies, China and Europe are more receptive to the electric car movement, as Americans continue to second-guess the viability of the green machines. With everyone from General Motors (NYSE:GM) to Toyota (NYSE:TM) pushing fuel-efficient vehicles, it is difficult to pick the winner in regard to investing.

TUTORIAL: Exchange-Traded Fund (ETF) Investing

This is why I turn to the batteries that will be going into the vehicles; and even more specifically, the lithium within the batteries. I have written about lithium stocks in the past, and over the last week the Big Three of lithium have rallied to new highs, so now is an appropriate time to revisit the sector.

Chemical & Mining Company of Chile (NYSE:SQM) is the world's largest lithium producer, but it is mainly known as a fertilizer company to most investors. Along with lithium, the company has three more business segments: specialty plant nutrition, iodine and industrial chemicals. During its last earnings report, the company saw net income increase by 45.6% from a year earlier as revenue rose by 23.6%. The stock currently trades with a forward P/E ratio of 25.7 and pays a 0.7% dividend. Technically, the stock is trading near an all-time high and needs to pull back to the low $60s before entering.

Rockwood Holdings (NYSE:ROC) is a diversified chemical company that is the world's leading manufacturer of lithium-based compounds through its Chemetall division. The company announced last month that it will increase lithium product prices by 20% to keep up with increased costs. This will also allow the company to boost production now that prices are back to 2008 levels. The stock is also at an all-time high and trades with a very reasonable forward P/E ratio of 14.1. A buy zone would be the mid $50s.

Not to be outdone is FMC Corp. (NYSE:FMC), which is similar to ROC as a diversified chemical company that is one of the Big Three in lithium production through its FMC Lithium division. The company also announced a 20% increase in lithium prices last month, allowing for high margins to cover increased expenses. Fundamentally, the stock trades with a forward P/E ratio of 13.7 and pays a dividend of 0.7%. Technically it joins the other two at an all-time high.

Alternative Option
Investors wanting exposure not only to the lithium suppliers, but also the battery makers, can opt for the Global X Lithium ETF (NYSE:LIT). The ETF is dramatically lagging the Big Three due to its 50% exposure to the battery makers. Lithium stocks are outperforming as the battery companies continue to struggle with sales and expenses. For a pure play lithium investment, the best choice would be to concentrate on the Big Three. (For related reading, see The Future Of Green Technology Investing.)

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

Related Articles
  1. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  2. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  3. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  4. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  5. Investing Basics

    Top Tips for Diversifying with Exotic Currencies

    Is there an opportunity in exotic currencies right now, or are you safer sticking to the major ones?
  6. Mutual Funds & ETFs

    The 3 Biggest Mutual Fund Companies in the US

    Compare and contrast the rise of America's big three institutional asset managers: BlackRock Funds, The Vanguard Group and State Street Global Advisors.
  7. Savings

    Easy Ways to Go Green and Stay Budget Friendly

    Social entrepreneurs recruit "skeptics" to team green, by providing economically efficient products and services that minimize consumers' carbon footprint.
  8. Investing

    Top Investment Banks In The Energy Industry

    Many global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
  9. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  10. Professionals

    5 Top-Rated Funds for Your Retirement Portfolio

    Mutual funds are a good choice for emotional investors. Here are five popular funds to consider.
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!