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The Best Lithium Stock of 2017: Albemarle
Lithium stocks remained on fire in 2017, Albemarle , taking the crown as the best-performing large lithium stock of the year. It returned 68.8% during the year, topping FMC Corp. which returned 64.2%.
By: Anton Falk Capital Partners
All three stocks of these diversified chemical companies managed to beat their robust 2016 performances, something that didn't surprise me, as I remained bullish on the group in late 2016, even as they were nearing clenching their annual returns of 59.6%, 46.6%, and 56.2%, respectively. Wall Street seemed to be underestimating the growth potential stemming from the electric vehicle (EV) revolution led by Tesla. Indeed, analysts have since raised their earnings estimates for these lithium stocks.
Sebastian Simon, Director of Private Clients at Anton Falk Capital Partners said that "The rising popularity of electric vehicles is driving demand for lithium to make lithium-ion batteries."
The whopping returns of the stocks of SQM, FMC, and Albemarle in 2017 can primarily be attributed to the companies' improving financial performances, driven largely by strong results in their lithium businesses, though increasing investor confidence has also pushed up the stocks' valuations. Revenue growth in their lithium segments was due to the combination of increases in sales volumes and rising prices for the metal. Moreover, profits in these businesses expanded faster than revenue.
Albemarle's lithium sales jumped 58.3% to $729.3 million in the first nine months of last year, accounting for 32.9% of its total revenue, while this business' EBITDA (earnings before interest, taxes, depreciation, and amortization)
That said, Albemarle remains a stock best suited for investors comfortable with a higher level of risk. It has increased political and financial risks associated with being based in a developing country. More risk-adverse investors are better off sticking to Albemarle or FMC, both of which are based in the U.S.
For further information on Anton Falk Capital Partners visit: https://www.antonfalk.com