Opinions
Alexander Lane, B Comm, C
Sociedad Quimica Y Minera
SQM-N
TOP PICK
Sep 21, 2009
Based in Chile. Largest, lowest cost producer of potassium nitrate, lithium carbonate and iodine. Potassium nitrate is more valuable and stable than potash and very important fertilizing. Lithium carbonate used for powering small electronics and possibly future electric vehicles. Iodine is needed for medical purposes, especially radiation treatment. Possible takeover target.
$39.100
Stock price when the opinion was issued
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BUY
Chemicals are doing well. He owns several chemical stocks, but not SQM. You may buy this for the litihum or fertilizer exposuire. You could step into this, and seasonally now is the time to buy fertilizer. Use the 150-day moving average of $52 as a stop loss. A good company. Pretty liquid.
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COMMENT
Lithium stocks rocketed from mid-2020 to late-2021. Stocks have fallen but not lithium itself which tripled in 2021 and added another 130% so far this year, up 800% since end-2020. Lithium stocks are reporting earnings and reflecting that price, so shares are starting to climb. Even if the economy slows down, the demand for lithium batteries will continue to rise. There's no shortage of lithium, but extracting it takes a long time and a lot of capital. SQM is a big Chilean materials company with a lot of lithium exposure. The street is worried about Chile's new socialist president, so SQM lagged its lithium peers last year. SQM shares are catching up this year, up 79% YTD. SQM reported tonight and he hasn't had a chance to examine them.
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BUY
He hasn't done seasonal analysis on lithium, but it will follow the metals sector and that is now doing well, from January into May. Lithium bounced up in February 2022, but has flatlined since then. Lithium is the key ingredient for car batteries and that is undersupplied. SQM shares have built a base, which is a strong set up for seasonality. Is poised to do well.
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BUY
The energy transition from fossil to renewable takes time. That's the reality. There's plenty of lithium in the world, but how quickly can we get it to market? The market was surprised by how quickly brine mining in Chile. Also, people aren't buying EV's as quickly as the market expected. Lithium is close to the bottom, so the risk/reward looks good.
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