Behind the Battery Stocks
The Only Thing Hotter than China
*Editor's Note: For a more recently updated article on the batteries main rare earth element, lithium, from Energy and Capital, please click here...
That's the instant message I got from publisher Brian Hicks last week, just as the stock went ballistic.
The ticker is that of China Ritar Power (NASDAQ: CRTP), a Shenzhen-based maker of nano-gel and lead acid batteries.
And if you know anything about the current energy market, you're aware of these truisms:
China is hot.
Batteries are hotter.
You see, batteries are the linchpin of the energy revolution that's afoot.
Wind needs batteries... Solar needs batteries... And, above all, hybrids and electric vehicles need batteries — lots of them.
It's why Buffett bought BYD (PK: BYDDF) in September of 2008. And he's made billions as the stock soared more than 400%.
China Ritar popped last week because of an announced contract with American Power Conversion Corp. for valve-regulated acid batteries. The size of the deal wasn't announced, but CRTP said it expects additional orders from American Power in the future.
Not to be outdone, ZBB Energy (AMEX: ZBB) tacked on 50% last week on what at first glance seemed like no news. A little digging showed that Obama gave a speech at the company's headquarters last August, then awarded a multi-million-dollar low-interest loan to one of its business partners last week.
Even the consumer electronics juggernauts are joining the fray...
Panasonic now has a full line of batteries — including one to back up home solar systems. Its subsidiary Sanyo said this week it “plans to slash the cost of manufacturing lithium-ion batteries used in cars to less than half the current industry average in five years.”
And in perhaps the biggest announcement yet, Johnson Controls (NYSE: JCI) said this weekend it has partnered with Hitachi to make and sell lithium-ion batteries in anticipation of “explosive growth” for the sector.
As I said, batteries are hot right now.
Follow the food chain...
Despite the universal bullishness for batteries, it can be hard to pick a winning stock with so many companies in the space.
To mitigate this risk, you have to follow the battery food chain.
Here's what I mean...
Every single battery — whether for a phone, laptop, power drill, or car — requires certain components to make. The type of battery determines the required components.
The standard is lead acid or nickel-metal hydride (NiMH).
More recently, lithium-ion has taken the spotlight. And that's why lithium stocks have been on fire for the past two years:
The company that controls the required resource will always outperform the companies making the product. That means lithium miners will outperform lithium battery makers.
So while battery companies are delivering hefty profits (like the CRTP, ZBB, and BYD examples above), lithium miners are still putting them to shame — with several delivering 1,000%+ gains this year.
The next sector to explode like this will be rare earth elements...
Just one electric car uses about 30 pounds of these rare materials. That's without mentioning their widespread use in cell phones, solar panels, recording equipment, and home electronics.
It doesn't take much to realize that rare earths are the next evolution in battery technology — and the next evolution of easy energy profits:
Stocks in this space are already taking off, and will soon pass the 1,000% gainers of the lithium boom. To help you get ahead, we've put together a comprehensive webinar on the rare earth market and how to successfully invest in it.
If you missed the lithium run, make sure you get ahead of the rare earth explosion.
Call it like you see it,
Energy Demand will Increase 58% Over the Next 25 Years
After getting your report, you’ll begin receiving the Energy and Capital e-Letter, delivered to your inbox daily.