One group of shares which have certainly gone gangbusters in the last 12 months has been the lithium producers.
High-flying companies such as Orocobre Limited (ASX: ORE), Pilbara Minerals Ltd (ASX: PLS), Altura Mining Ltd (ASX: AJM) and Galaxy Resources Limited (ASX: GXY) have been the standouts in my opinion with returns of at least 100% during this time.
Far and away the best performer in the group has been Galaxy Resources. In the last 12 months its shares have risen by a mind-boggling 1,140%. Any lucky investors that invested $10,000 in the company 12 months ago would now be sitting on an investment worth approximately $124,000.
The reason for the incredible performance of this group of shares is the surge in the price of lithium itself. Lithium prices have skyrocketed due to the incredible demand predicted for lithium batteries for use in everything from smartphones, renewable energy, electric cars, and laptops.
In its quarterly update in July Orocobre’s management advised that its expects an average price of over US$10,000 per tonne for lithium carbonate to be sustained for some time to come. This is more than double recent levels and really gives you an indication as to why investors have piled into the industry this year.
But despite all the promise a spot of weakness has started to show in the industry today. In afternoon trade the shares of Orocobre, Pilbara, Altura, and Galaxy Resources are all down by at least 5% as short interest starts to slowly creep up.
Whilst this could just be a temporary blip, there are no doubt grave concerns that the lithium boom could end in a bust. Whether today’s sell off proves to be the start of it only time will tell, but I certainly wouldn’t want to be left holding their shares if and when one does come.
Because of this I would suggest investors avoid the industry at this point in time and focus on other areas of the market. As tempting as it might be, I feel it’s best to sit this one out.
Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
*Returns as of 6/8/2020
Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
- 2 fantastic ASX growth shares to buy this month – January 22, 2021 4:45pm
- Leading broker tips Super Retail (ASX:SUL) share price to rocket higher – January 22, 2021 4:08pm
- 3 reasons the BHP (ASX:BHP) share price could be in the buy zone – January 22, 2021 3:41pm