Lithium Stocks: Why Albemarle Is a Nothing-but-Trouble Play to Avoid
An indirect but interesting way to invest in the electric vehicle (EV) boom is through shares of high-conviction lithium miners. Thus, you may have heard about multinational specialty chemical and lithium company Albermarle (NYSE:ALB), but we definitely don’t consider it to be high-conviction. Indeed, we’re seeing major issues with ALB stock and can only give it a “D” grade right now.
We’ll acknowledge that Albemarle has been in the financial headlines recently. That’s not necessarily a good thing, though. The old adage that “there’s no such thing as bad press” probably doesn’t apply to Albemarle in 2023.
Did You Heed the Warning About ALB Stock?
On Sept. 26, we issued a warning about ALB stock, when it traded at $163 and Albemarle’s trailing 12-month price-to-earnings ratio was approximately 5x. Our concern was that value-focused investors might assume that Albemarle shares were a bargain.
Just because shares have gone down in price, doesn’t always mean they’re a bargain. The Albemarle share price had been on a steep downtrend since February, and staying out of the way was the best policy.
In late October, ALB stock fell below $140 and Albemarle’s P/E ratio was slightly above 4x. As it turned out, Albemarle’s shares weren’t a good value; they were just a value trap.
We tried to warn people about Albemarle’s problems. The company was in the financial press, but not for something positive.
Specifically, The Wall Street Journal and Reuters reported that Albemarle paid more than $218 million to settle a foreign bribery probe. This settlement was to “resolve possible violations of the U.S. Foreign Corrupt Practices Act”; this doesn’t sound like positive public relations for Albemarle.
Albemarle Ends Up in the Headlines Again
More recently, Albemarle ended up in the financial headlines again, this time in The Wall Street Journal and Bloomberg. First, we’ll provide some background info. For a while, some investors and commentators had been buzzing about Albemarle’s proposal to acquire Australia-based mining company Liontown Resources (OTCMKTS:LINRF).
This could have been a value-added acquisition for Albemarle. Yet, it wasn’t to be. The Bloomberg headline spoke loudly and clearly: “Liontown Dives 35% After Bid Collapse, Emergency Fund Raising.”
It’s probably not positive press coverage if the headline uses the word “collapse.” Apparently, mining tycoon Gina Rinehart stepped in and made a competing offer that Liontown couldn’t refuse. That’s undoubtedly disappointing to some of Albemarle’s shareholders. Yet, it’s an unfortunate reality for Albemarle, even if it’s perfectly fine with Rinehart and Liontown Resources.
Find Another EV Industry Investment Than ALB Stock
There are plenty of EV materials stocks out there in 2023. Why add so much risk to your portfolio with a stock that’s on a steep downtrend, representing a company with less-than-ideal press coverage?
In the world of mining stocks, the risk level is elevated and you should only select the best while avoiding the rest. Clearly, Albemarle fits into the “rest” category, not the “best” category. So, in the final analysis, ALB stock only earns a “D” grade and investors shouldn’t be too eager to buy it now.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
