Governments around the world are growing increasingly conscious about climate change and taking the necessary steps to fight it. Along with the other initiatives and innovations, Electric vehicles (EVs) are one of the most popular advancements forward for society to become greener. Indeed, electrification is a key catalyst driving forecasts of carbon emissions reductions over the long term.
In many respects, the Canadian market has done a great job of fostering growth for EVs. Aside from companies involved in the production of electric vehicles, Canada’s mining sector supports this growth. One such miner I’ve been focused on for some time as a “picks and shovels” way to play the electrification trend is Lithium Americas (TSX:LAC).
Here’s why I still think Lithium Americas could be the best way to play this sector for those cautious about valuations in the EV space.
Hedge funds and Lithium America’s latest earnings
While Lithium Americas is based in Canada, the company operates key mines in the U.S. and Argentina. The company’s Cauchari-Olaroz, Thacker Pass and Pastos Grandes projects are among the largest in the world. Thus, it’s no surprise that hedge funds such as Avantax Advisory Services and Armstrong Advisory Group increased their stakes in the company in the first quarter.
The company’s recent second-quarter earnings blew away expectations. The company brought in GAAP earnings of $0.16 per share during the quarter, while expectations called for a loss of $0.18 per share. This was a massive beat, suggesting the company’s margins may be stronger than expected, inviting institutional investors to take positions in this stock.
The discovery of the world’s largest lithium deposit and its impact on lithium reserves
A recent study suggests that the world’s largest lithium deposit could be inside an ancient American supervolcano, McDermitt Caldera, formed about 16 million years ago on the border of Nevada and Oregon. A study funded by Lithium Americas suggests a potential 20-40 million metric tons of lithium in clay inside the volcano.
Shares of Lithium Americas rose 7% immediately following the news. That’s mostly because the company operates the Thacker Pass lithium mine in the caldera. While this discovery is promising, it is uncertain whether lithium mining is economically viable.
Lithium America’s plans to start mining in 2026, which may impact the global lithium market and U.S. independence. Until now, the largest lithium deposit was believed to be in the Bolivian salt flats.
Bottom line
With this massive discovery and the EV market going up and to the right, it can be a wise decision to add LAC stock to your portfolio. If you are an investor with a long-term investment horizon, this stock can make a great addition to your investment goals.
