Buy this ETF for exposure to the booming electric vehicle market, NDR Research says
Ned Davis Research suggests that one exchange-traded fund tracks battery and lithium companies to help investors capitalize on the increase in electric vehicle ownership. The firm favors the Global X Lithium & Battery Tech ETF , which offers broad exposure to companies involved in the mining and processing of lithium, as well as companies that make batteries for car companies. Ned Davis explained that the rising cost of gas makes it more appealing to own an EV, which will lead to increased sales. Last week’s record national average price for regular gasoline was $4.60, an increase of $3.041 from one year ago. The firm sent a note to clients stating that the key assumption in the EV vs. ICE analysis was that gasoline prices will remain at an elevated level over five years. We have reasons to believe prices may continue to rise for some time. The International Energy Agency data shows that EV sales have more than doubled between now and 2021, to 6.66 million vehicles. Nearly 9% of all global vehicle sales are now made up by electric vehicles, nearly three times the share in 2019. Ned Davis indicated that batteries and lithium are preferred by the company to promote the electric car theme. Because they concentrate on the essential components of an EV, it is easy to see why. The firm’s analysts, led by Pat Tschosik, stated that while we don’t know the region where the best-selling car makers will be, they do know that every EV requires a battery. The fund’s May value is slightly higher, but it has fallen more than 10% in 2022 due to a wide market sell-off. Tschosik stated that the ETF experienced its largest five-day outflow in November. This led him to suspect that capitulation may be imminent. Albemarle, SQM, BYD, Yunnan Energy, Eve Energy, and Yunnan Energy are the top five holdings of this fund. Although lithium prices are more than twice as high this year following a 2021 surge, the performance of the mines that produce the metal has not been the same. This could change. Albemarle, Livent and others said that they were renegotiating contracts. This will increase their exposure to spot prices. According to the company, it expects its 2022 net revenues between $5.8 and $6.2 trillion. It is now the second consecutive month the company has raised its forecast. Albemarle had previously stated that it expects sales of between $5.2 billion-$5.6 billion in May. This is an increase from its prior guidance, which was $4.2 billion to $4.5 trillion. Of course, excessively high lithium prices can have an adverse effect on EV sales. The higher cost of lithium will be passed to customers by the automakers. This could have an impact on how many vehicles are sold.