The Global X Lithium & Battery Tech Fund (LIT) focuses on the promising lithium-ion battery market.
The demand for lithium is heavily influenced by the demand for electric vehicles, with both set to rise sharply over the next two decades.
LIT focuses on the US, where the EV market is expected to increase 30+-fold by 2040.
While lithium has multiple uses in medicine or as a constituent of heat resistant glass, its main use lies in lithium-ion batteries especially for electric vehicles (EVs). The lithium used for batteries outsells the lithium for other purposes by a factor of 3:1. The Global X Lithium & Battery ETF (LIT) seeks to trace the price appreciation (or fluctuation) of this element by tracking the Solactive Global Lithium Index (SOLLIT). As an ETF, its total expense ratio of 0.75% is relatively low compared to many mutual funds. So as the demand for EVs is on the rise, could it be lucrative to invest in the LIT ETF?
First of all let us take a closer look of the ETF’s composition as it is disclosed here. Among the 10 largest holdings of LIT according to the Global X fact sheet as of Dec. 31 were three Ltd. and seven corporations. These corporations are (sorted by holding size) FMC Corp. (FMC), Albemarle Corp. (ALB), Sociedad Quimica y Minera (SQM), Tesla Inc. (TSLA), EnerSys (ENS), GS Yuasa Corp. (OTCPK:GYUAF) and Panasonic Corp. (OTCPK:PCRFY). Since GS Yuasa and Panasonic are OTCPK stocks their EPS and PE values are out of line with what you would expect for exchange listed stocks:
- FMC has an EPS ratio of 5.65 and a PE ratio of 14.21.
- ALB has an EPS ratio of 6.25 and a PE ratio of 13.7.
- SQM has an EPS ratio of 1.73 and a PE ratio of 22.3.
- TSLA has an EPS ratio of 5.67 and a PE ratio of 47.2.
- GYUAF has an EPS ratio of 173.85 and a PE ratio of 0.11.
- PCRFY has an EPS ratio of 107.75 and a PE ratio of 0.08. (as of 4/5/19)
Newer data as provided by Seeking Alpha shows that this top-10 composition shifted a little bit and now includes four Ltd. and six corporations. Panasonic no longer belongs to the top-10 list.