ASX companies that supply commodities for the electric car industry have done pretty well the past couple of years, as the world moves to a low-carbon future.
But believe it or not, some stocks have dipped the past few weeks, giving hungry investors a potential entry point.
Here are 2 such examples that experts are rating as buy right now:
This is the new lithium
The Syrah Resources Ltd (ASX: SYR) share price has dropped almost 16% since 28 April.
Marcus Today analyst Thomas Wegner told The Bull he sees no reason to shy away from it though.
“The graphite producer has been supported by increasing sales of electric vehicles.”
Although it hasn’t had the hype that lithium has enjoyed recently, graphite is another essential ingredient of high-end batteries.
Credit Suisse research analyst Phineas Glover said last month that the commodity will be in high demand in years to come.
“It looks a lot more like lithium three to five years ago,” he told the Sydney Morning Herald.
“In five years’ time, suddenly graphite pricing will have gone up in my view quite significantly, and it will bring a huge incentive to bring all these projects on board.”
Although there are rival graphite producers on the ASX, Wegner is encouraged by Syrah’s recent deals.
“It secured a loan from the US Department of Energy to support the growing electric vehicle industry in the US and to shore up supply chains of critical minerals,” he said.
“Signing an offtake agreement with Tesla in December also adds to its appeal.”
Who wants to be a millionaire?
Lithium producers are somewhat off the boil now too.
Pilbara Minerals Ltd (ASX: PLS) shares have lost more than 29% since 4 April, which Ord Minnett senior investment adviser Tony Paterno blamed on “softer volumes in the March quarter”.
But that just makes it a bargain stock now.
“Costs were lower than our forecasts and we expect them to fall into the June quarter,” he told The Bull.
“Another positive pricing result at the latest Battery Metal Exchange auction provides confidence that [lithium] prices should remain high in the near term.”
Looking at the long term is a wise attitude to take for shares like Pilbara.
The Motley Fool’s Aaron Teboneras calculated last week how wealthy you would be after investing $10,000 in two-cent Pilbara shares a decade ago.
“Those 500,000 shares would be now worth a staggering $1.28 million,” he said.
“When factoring in percentage terms, this implies an incredible gain of 12,600% or an average yearly return of 62.45%.”
For Paterno, Pilbara is the pick of lithium producers at the moment.
“Pilbara shows deep valuation support and dominates the near term earnings metrics of our lithium coverage.”