Want to Invest in Lithium Stocks? You Might Consider This ETF

Lithium stocks are having a great year, thanks largely to rosy growth projections for electric vehicles (EVs). Lithium is needed to manufacture the rechargeable lithium-ion batteries that power EVs, and it's required to produce energy-storage products, another fast-growing market.

Shares of EV pioneer Tesla (TSLA -4.95%) have soared 586% this year through Nov. 25. While the major lithium producers haven't been on fire to the same degree, their performances are still stellar.  So far in 2020, shares of Albemarle (ALB -0.96%), Sociedad Quimica y Minera de Chile, or SQM (SQM -0.21%), and Livent (LTHM) -- the three largest lithium producers listed on a major U.S. stock exchange -- have returned about 87%, 86%, and 84%, respectively. And some of the smaller players have even larger gains.  

If you want to gain exposure to the broad lithium space but want to spread your bets around on many stocks, you might consider investing in the Global X Lithium & Battery Tech ETF (LIT -0.90%). 

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Global X Lithium & Battery Tech ETF: The basics 

The Global X Lithium & Battery Tech ETF "invests in the full lithium cycle, from mining and refining the metal, through battery production," according to its prospectus. It's not an actively managed fund. Rather, it aims to track the performance, before fees and expenses, of the Solactive Global Lithium Index. The fund's expense ratio is 0.75%, which is relatively reasonable.

The fund had 40 holdings as of Nov. 25 and net assets of nearly $1.3 billion as of the day before. By dollar value, 49% of the holdings were based in China, 21% in the United States, and 11% in South Korea, as of Oct. 31. No other country accounts for more than 5% of total holdings. This country breakdown reflects the great strides China has made in lithium and related markets in recent years. 

Global X Lithium & Battery Tech ETF: Top 10 holdings 

Data sources: Global X and YCharts. YTD = year to date. N/A = Not available or doesn't trade in the U.S. Market cap and returns as of Nov. 25; percentage weight data as of Nov. 24.

Albemarle (No. 1), Ganfeng (No. 3), and SQM (No. 6) are lithium miners. Albemarle and SQM aren't pure plays, because they make a range of chemicals. 

Where's Livent? The U.S.-based pure-play lithium producer is the ETF's 19th largest holding, accounting for nearly 2% of the portfolio. How about Lithium Americas? The Canada-based junior lithium miner, which isn't yet mining any product for sale, is the fund's 33rd largest holding.  

BYD, the No. 2 holding, touts that it's "the world's largest electric vehicle manufacturer." It's also a leading maker of rechargeable batteries for many applications. Warren Buffett's Berkshire Hathaway owns a big stake in the company.

Next up is No. 4, Samsung SDI. It produces lithium-ion batteries for a variety of uses and makes electronic materials used in semiconductors and displays. It's followed by LG Chem, which is the world's biggest maker of EV batteries, and has other businesses.

Panasonic, the No. 7 holding, produces electronic products for a range of consumer and industrial applications. It supplies lithium-ion batteries for EVs and energy-storage systems. 

Tesla, No. 8, has energy-storage and solar-power businesses in addition to its premium EVs. It's probably included in the lithium ETF because it produces lithium-ion battery packs for its energy-storage products and non-China-made vehicles at its Nevada Gigafactory. Panasonic, which supplies the battery cells, is its partner at this location.

Lastly, Eve Energy and Contemporary Amperex Technology both make lithium batteries.

A solid fit for some investors

The Global X Lithium & Battery Technology ETF seems a solid option for investors who want broad exposure to the lithium space, which has been highly volatile over the long term. Keep in mind that like any ETF (or mutual fund), its diversification can be both an advantage and a disadvantage.