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

Lithium
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. Mutual Funds & ETFs

    ETF Analysis: iShares Asia 50

    Read more about BlackRock's iShares Asia 50 Fund, an ETF that follows the four "Asian Tiger'' nations plus China.
  2. Investing

    Build a Retirement Portfolio for a Different World

    When it comes to retirement rules of thumb, the financial industry is experiencing new guidelines and the new rules for navigating retirement.
  3. Mutual Funds & ETFs

    ETF Analysis: WisdomTree International LargeCp Div

    Learn more about the WisdomTree International LargeCap Dividend fund, an income-based international equities ETF that focuses heavily on the United Kingdom.
  4. Mutual Funds & ETFs

    ETF Analysis: United States Gasoline Fund

    Learn about the United States Gasoline Fund, the characteristics of the exchange-traded fund, and the suitability and recommendations of it.
  5. Mutual Funds & ETFs

    ETF Analysis: United States 12 Month Oil

    Find out more information about the United States 12 Month Oil ETF, and explore detailed analysis of the characteristics, suitability and recommendations of it.
  6. Mutual Funds & ETFs

    ETF Analysis: ProShares Ultra Nasdaq Biotechnology

    Find out information about the ProShares Ultra Nasdaq Biotechnology exchange-traded fund, and learn detailed analysis of its characteristics and suitability.
  7. Mutual Funds & ETFs

    ETF Analysis: Direxion Daily S&P Biotech Bull 3X

    Learn more about the Direxion Daily S&P Biotech Bull 3x exchange-traded fund, a new triple-leveraged ETF tracking biotechnology equities.
  8. Mutual Funds & ETFs

    ETF Analysis: First Trust Health Care AlphaDEX

    Learn more about the First Trust Health Care AlphaDEX exchange-traded fund, an indexed fund that uses an advanced stock selection methodology.
  9. Forex Strategies

    Two Great Currencies To Profit From Oil Volatility

    U.S. dollar crosses with Canadian and Australian dollars offer easy access to crude oil trends due to their tight correlation with energy futures.
  10. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI Emerging Mkts

    Learn more about the PowerShares FTSE RAFI Emerging Markets ETF, a fundamentally weighted fund that tracks emerging market equities.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Benchmark Crude Oil

    Benchmark crude oil is crude oil that serves as a pricing reference, ...
RELATED FAQS
  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. 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 >>
  6. 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 >>

You May Also Like

COMPANIES IN THIS ARTICLE
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!