The Ins And Outs of the Lithium ETF

While the Global X Lithium ETF (NYSEArca: LIT) recently succumbed to some profit-taking, the lone exchange traded fund dedicated to the lithium equity trade mostly kept its momentum in the third quarter. LIT surged about 13% in September, bringing its third-quarter gain to 29%.

LIT enters the fourth quarter with a year-to-date gain of almost 53%, making it one of 2017’s best-performing non-leveraged ETFs.

LIT, which debuted over seven years ago, tracks the Solactive Global Lithium Index. The ETF holds 27 stocks. While electric car maker Tesla is 5.6% of the ETF’s weight, that is good for just the fourth spot on the fund’s roster. LIT’s top two holdings – FMC Corp. (NYSE: FMC) and Soc. Quimica & Minera de Chile SA (NYSE: SQM) – combine for over 42% of the ETF’s weight.

When many investors think of lithium, they think of electric vehicles. Indeed, electric vehicles, or EVs, are integral parts of the lithium demand equation.

“While electric vehicles have previously been viewed as a gadget for affluent early adopters, EVs appear to be on the verge of going mainstream,” according to Global X research. “A major driver of this change is a major reduction in battery costs, which has made EVs much more affordable relative to traditional combustion engine-powered vehicles. Bloomberg’s New Energy Finance unit found that lithium-ion battery costs fell by nearly 50% from 2014 to 2016 as battery producers raised output and competition increased.”