Over the last couple of years, lithium producers and miners have enjoyed a parabolic jump in their stock prices and market caps. As I will later illustrate, much of the gains for lithium-related companies have come as a result of the “hype” surrounding electric automobile development. Of course, Tesla has been the primary instigator of this “hype” type, followed by mainstream automotive manufacturers’ initiatives in all electric and/or hybrid automobiles.
Personally, my assessment of the lithium industry is generally bullish long-term. Consequently, I believe that investing in carefully selected lithium companies at appropriate valuations could represent a compelling long-term investment opportunity. On the other hand, I never see value in positioning yourself as the “greater fool.” For those not familiar with this term, it suggests that you foolishly pay more for a company than it’s worth on the basis that a “greater fool” than you will soon come along and be willing to pay you more in the future.
Therefore, the seminal question I will attempt to answer with this offering is straightforward. Has the recent drop in lithium stocks brought these companies down to attractive valuation levels? As a general statement, most lithium stocks are significantly off their previous highs. Consequently, I have begun to see a rash of articles suggesting that this recent selloff in lithium stocks has produced a buying opportunity. Since the drops were pretty significant and over a short period of time, it appears logical that attractive valuations have recently manifested.