Lithium shares have been all the rage the past year or two, as the transition to zero emissions sees demand soar for the valuable battery ingredient.
However, lithium producers have not been immune to the recent market sell-off.
As such, Burman Invest chief investment officer Julia Lee this week revealed that she had recently bought up 2 ASX shares to take advantage of discounted prices.
'Supply just can't keep up with demand'
Lee told Switzer TV Investing that her fund had bought Pilbara Minerals Ltd (ASX: PLS) and Allkem Ltd (ASX: AKE) shares.
China is crucial to the immediate future of lithium prices, she added.
"China traditionally offers electric vehicle subsidies, which helps to put a fire under that space," said Lee.
"So we're watching to see whether we are going to see some more subsidies coming through to help that electric vehicle space."
At the moment, "supply just can't keep up with demand" for lithium.
"If you're producing at these types of prices, it's a really nice place to be."
Allkem shares have lost more than 17% over the past fortnight and Pilbara has shaved about 11% off its value.
So both stocks are going for a tidy discount to start 2022.
Hard rock or brine lithium?
According to Lee, Pilbara has an advantage because it produces lithium from "hard rock" sources, as opposed to brine.
"Usually hard rock is a higher quality than brine," she said.
"But at the moment, because the demand for lithium is so strong, both are getting quite good prices."
However, Lee did warn that investors need to keep a close eye on cyclical ASX shares like those in the mining industry.
"My general rule of thumb with commodity prices is when you see a big supply response, that's the time to start selling some of your stocks," she said.
"Most minerals and most commodities aren't very difficult to get out of the ground – it just takes time. At the moment, if you're producing lithium you're in a great space, because the rest of the market hasn't caught up yet."
Allkem shares closed Wednesday at $9.63, while Pilbara ended up at $3.41, both marking 4.6% gains for the day's trade.
