The Global X Battery Tech & Lithium ETF (ASX: ACDC) closed the session on Thursday up 1.24% to $88.28.
But over 2022 so far, the exchange-traded fund (ETF) is down 8.65%, which might seem surprising given this year is turning out to be another ripper for ASX lithium shares.
Let's look at some examples among the rip-snorters of this particular ASX mining segment.
- The Core Lithium Ltd (ASX: CXO) share price is up 119% year to date (YTD)
- The Sayona Mining Ltd (ASX: SYA) share price is up 86% YTD
- The Pilbara Minerals Ltd (ASX: PLS) share price is up 45% YTD
- The IGO Ltd (ASX: IGO) share price is up 37% YTD
- The Allkem Ltd (ASX: AKE) share price is up 29% YTD.
Why is the ACDC ETF in the red in 2022?
The first thing to understand is that the Global X Battery Tech & Lithium ETF is not a pure-play lithium ETF.
It's got some ASX lithium shares in there, but it also invests in global companies. And not just those in lithium mining either. It holds battery technology companies, electric vehicle (EV) companies like Tesla Inc (NASDAQ: TSLA), and car manufacturers that are also building EVs, like Renault SA (FRA: RNL).
The provider, Global X ETFs Australia, puts it this way:
ACDC invests in companies throughout the lithium cycle, including mining, refinement and battery production, cutting across traditional sector and geographic definitions.
So, your shares in ACDC are going to be affected by many factors other than the record lithium price. That's the main thing that's been pushing up the value of ASX lithium shares over the past two years.
So, this is one reason why the ACDC ETF isn't going gangbusters like so many ASX lithium shares.
Why invest in the ACDC ETF?
The ACDC ETF is popular with ASX investors who want to capitalise on the global investing thematic of energy transition but don't want to pick individual stocks to invest in. Problem is, when you purchase a basket of international and ASX shares, you've got to accept the good with the bad.
As with any shares portfolio, you'll have winners and losers every year. The losers aren't necessarily bad companies, but every company has good and bad years, and that will be reflected in their share prices.
This is especially the case with young companies in their initial growth phase. Remember, global demand for lithium on the back of demand for electric vehicles is a pretty recent phenomenon. Just 10 years ago, Tesla was a small cap. Only five years ago, it was a US$20 stock (today it's 11 times that price).
However, if you believe the lithium and battery thematic will be ongoing, then the Global X Battery Tech & Lithium ETF may be a good place to be. Especially if you don't like seeing large share price fluctuations. By nature, a basket of shares is not going to react as strongly to the individual news of its 31 shares.
The ACDC ETF has a 52-week high price of $99.25 and a 52-week low price of $74.72. So, right now, it's trading in the middle of that range.
Which ASX lithium shares does the ACDC ETF hold?
According to provider, Global X ETFs Australia, the top six holdings are as follows. As you'll note, only three are listed on the ASX. These are also the only ASX lithium shares the ACDC ETF holds.
- Pilbara Minerals with a weighting of 6.83%
- Renault with a weighting of 5.19%
- Minerals Resources Limited (ASX: MIN) with a weighting of 4.94%
- LG Energy Solution Ltd (KRX: 373220) with a weighting of 4.61%
- Livent Corp (NYSE: LTHM) with a weighting of 4.48%
- Allkem with a weighting of 4.44%.
