Not that long ago, electric vehicles (EVs) were destined for the few as the battery technology used was far too expensive for the mass market, while it was not advanced enough to enable long-distance drives. Today, EVs are increasingly challenging the status quo of internal combustion cars and right at the centre of this transformation is lithium-ion batteries and the companies involved in the entire EV ecosystem.
Often referred to as white petroleum, lithium is a key component in energy storage so much so that demand in recent years has skyrocketed and as a result, lithium stocks have also soared. Producers like the likes of Albemarle (ALB) has returned about 102% in 2020, while Livent (LTHM) shares have rocketed over 300% from the March 2020 lows.
Investors looking to make a play on the broad lithium space but don’t want to invest in any specific stock can do so by investing in the Global X Lithium & Battery Tech ETF (LIT).
|Fund launch date||22/07/2010|
|Legal structure||Open-ended fund|
|Net Asset Value (NAV)||$57.82|
|Competing ETFs||BATT, PICK, REMX|
LIT invests in the full lithium cycle by holding securities that are engaged in some aspect of the lithium industry, be it exploration, mining or refining the metal, battery production and the manufacture of lithium-based goods. The ETF’s objective is to provide investment results that correspond to the price and yield performance, before fees and expenses, of the Solactive Global Lithium Index, which tracks the performance of the largest and most liquid listed companies active in exploration and/or mining of lithium or the production of lithium batteries.
As a result, it invests at least 80% of its total assets in the securities of the underlying index and in American Depositary Receipts, known as ADRs, as well as Global Depositary Receipts, otherwise called GDRs.
So why LIT? The ETF offers investors efficient access to a broad basket of companies involved in the industry, while at the same time, it affords thematic exposure to the lithium and battery technology. And as consumer interest in alternative energy vehicles is propelling the business forward and demand for lithium has increased, this is a sector that is bound to become even more significant in the future.
What are LIT’s top holdings?
The LIT ETF has 41 stock holdings and zero bond holdings with materials occupying 42.7% of the net assets, industrial accounting to 28.5% and consumer discretionary 16.3%. Moreover, information technology amounts to 11.3%. On the other hand, from a geographical standpoint, China-based companies top the list at 43.3%, followed by the US at 22%, South Korea at 11.64% and Japan 6.7%, amongst others.
Here is a breakdown of the ETF’s top 10 holdings.
|TICKER||COMPANY||MARKET VALUE ($)||NET ASSETS %|
|002460||GANFENG LITHIUM CO LTD-A||174,205,298.85||6.38|
|SMSN||SAMSUNG SDI CO LTD||152,551,748.87||5.59|
|300014||EVE ENERGY CO LTD-A||136,269,467.19||4.99|
|SQM||QUIMICA Y-SP ADR||135,617,126.38||4.97|
|1211||BYD CO LTD-H||132,927,325.81||4.87|
|051910 KS||LG CHEM LTD||124,128,550.43||4.55|
What has LIT’s performance been like?
LIT has had a good 2020, soaring to gains of over 120% as many of its top holders, such as Tesla (TSLA), for instance, has moved from strength to strength. The ETF’s price has gained 0.0732% on the last trading day at the time of writing (February 19, 2021), rising to $68.31, while the price is also up by 0.52% over the past two weeks. Indeed, LIT was up 16% in November of 2020 and over an eye-popping 98% in December of the same year, reaching a record high.
Historically, the trailing total returns the ETF has generated include the following:
1 month: +7.20%
6 months: +83.93%
1 year: +129.50%
3 years: +22.70%
5 years: +32.28%
According to the MSCI ESG Fund Rating which measures the resiliency of portfolios against long-term risks and opportunities that may take place due to environmental, social and governance factors (ESG), LIT has a rating of BBB. ESG Fund Ratings range from AAA – the best, to CCC – the worst. LIT’s rating indicates that it could potentially be resilient to these ESG events.
So is LIT a buy?
Despite the COVID-19 crisis hitting overall car sales, total battery-powered EV sales rose 33% to over 2 million vehicles, with the electric cars market share reaching 3% in 2020. Surprisingly, European EV sales jumped 104% year on year to almost 0.7 million, superseding China’s growth as the global driver of electric car sales for the first time in five years. Lithium and battery tech lies at the very core of this energy transition and is likely to remain so in the future. Produced since the 1980s as the main power source for our mobile phones, the production of lithium batteries is growing at an unprecedented scale, particularly driven by the expansion of the EV industry.
And some of LIT’s holdings are truly noteworthy. The Chinese lithium mining company Ganfeng Lithium, the third-largest lithium compound producer in the world and the leading producer in China, covers a wide area of the lithium-ion battery supply chain. It also has a broad international footprint with operations in Australia, Argentina, Mexico, Ireland and China, as well as major long-term contracts with Tesla, Panasonic (JPY), Volkswagen (VOW), Samsung (SMSN) and others.
On the other hand, the second-largest battery producer, Contemporary Amperex Technology is a Tier 1 battery producer, the highest ranked tier out of three categories, which means that it produces the highest quality lithium-ion batteries at scale for western automotive uses, while it is qualified to supply major electric vehicles markets outside of China. As recently as January of 2021, the company announced its intention to roll out a million-mile battery which could support decades of heavy use, potentially going well beyond the lifespan of an internal combustion engine car.
Another heavyweight in the industry and one of LIT’s top holders, Panasonic, boasts a history that spans more than 100 years and is one of the top-3 global EV battery manufacturers. Having forged a strong and long-term partnership with Tesla, in 2014 the two companies came together to build the largest lithium-ion battery factory, dubbed Giga Nevada, while in June 2020, Tesla penned a three-year deal with the company for battery supply from Gigafactory. Once Tesla’s exclusive battery supplier, Panasonic is expanding its EV battery customer base to include companies such as Toyota with which it has partnered to build a lithium-ion plant in Japan with the aim to supply 500,000 EVs per year starting in 2022.
But there’s another upside to LIT. Thematic ETFs, just like LIT, have been 2020’s big winners. These are focused on either disruptive technologies, such as robotics or long-term social trends which have accelerated as a result of the COVID-19 pandemic like e-commerce or clean energy. More specifically, according to Global X’s Thematic ETF report, assets in these types of ETFs have doubled in the first three quarters of 2020, from $28 billion to $59 billion.
How to invest in the LIT ETF with CCTrader
Ready to invest in LIT? Your first step to tapping into a world of investment opportunities with CCTrader is to sign up and open an account.
To do so:
- Download the app from either Google Play or the Apple App Store. Alternatively, you may access CCTrader on your desktop by visiting https://live.cctrader.com/
- Once you’ve onboarded successfully and have funded your account, head over to the search bar at the top of your screen and input either the company name or ticker symbol.
- Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. LIT has been added to your portfolio.
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