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The U.S. automakers and their suppliers are well behind Asian manufacturers. The result is a massive game of catchup to develop newer, more efficient batteries that cost less than contemporary counterparts to power the electric vehicle (EV) industry.
And today, we're looking at the three best battery stocks to invest in now so you can ride the trend higher.
As the EV industry grows, there's going to be massive competition within the battery industry. This places more pressure on battery companies to design and produce batteries that can keep up with - or push - the industry. And that can make it hard to sort out the winning tech stocks from the losers.
Once you find a winner in the EV industry, that stock can present a massive, long-term growth opportunity. Considering the fact that the global EV market is expected to reach $1.3 trillion by 2028, it's clear to see why this industry has been one to watch for some time now.
With so much focus placed on the change from internal combustion engines over to EVs, it's worth investing in the space ahead of time as the tech-and competition-continues to evolve.
But which battery stocks stand out among the rest? Well, that's what we're here to find out.
So, here are the three best battery stocks to invest in now...
Best Battery Stocks, No. 3: Global X Lithium and Battery Tech ETF
While the Global X Lithium and Battery Tech ETF (NYSE: LIT) isn't a standalone company or stock, it's more than worthy of including.
That's because this ETF focuses on battery makers and lithium miners. It offers great exposure to a number of heavy-hitters in the battery and EV industry like Albermarle Corp. and Tesla, as well as smaller, over-the-counter (OTC) stocks like Pilbara Minerals Ltd. and BYD Co.
Some other notable holdings are China's Yunnan Energy New Material and Contemporary Amperex Technology Co. - otherwise known as CATL. And CATL is one of the world's biggest developers of EV batteries. Neither of these stocks is listed in the United States.
These stocks, and others, aren't the easiest for everyone to invest in since they are traded only in the stock markets of foreign countries rather than the major U.S. indexes. This is the case for many lithium miners, battery developers, and battery-component makers.
Unless you know how to trade OTC stocks, you're going to have a tough time investing in some key companies here - LIT remedies that problem. And with the massive push in the EV industry to rapidly evolve and accelerate, many automakers are investing billions into the production of lithium-ion batteries.
That's why LIT really stands out among the rest.
A number of companies, especially lithium miners and battery makers, will hugely benefit from this shift away from the old, combustible engines to newer, more efficient alternatives.
Best Battery Stocks, No. 2: Romeo Power Inc.
Launched more than five years ago by former Tesla and SpaceX engineers, Romeo Power Inc. (NYSE: RMO) is a California-based manufacturer that focuses on developing batteries and related software for commercial vehicles.
Currently, the company produces little revenue from its heavy-duty battery packs - just $5.8 million in the third quarter of 2021.
But that is bound to change, and last year was just a snippet of what could be expected.
In November 2021, shares of RMO surged by 20% after a very solid Q3 earnings report - the company's revenue grew 747% year over year to $5.76 million and beat out revenue estimates by $2.6 million.
This success is partly due to the deals RMO made earlier in the year.
Back in April of 2021, RMO has come to a long-term agreement with the truck manufacturer PACCAR to supply its Peterbilt 579 and 520 electric trucks with batteries and software. The deal will run through 2025.
And if you go back a little further to 2019, RMO struck up a joint venture with auto supplier BorgWarner. The deal might've bagged BorgWarner 20% of RMO stock, but RMO also benefitted from the deal. Not long after the announcement, BorgWarner shared that it intends to boost revenue from EV components to 45% by 2030, an increase from the less than 3% it was at the time.
There's a path of growth laid out for RMO, but it'll depend on how fast the demand for electric trucks ramps up. The way things appear now, with U.S. President Joe Biden and most of the world pushing for renewable energies, the world will one day be fully electric. That puts RMO in a fantastic position to profit.
Best Battery Stocks, No. 1: QuantumScape Corp.
QuantumScape Corp. (NYSE: QS) is another electric vehicle firm based in California; it's a Volkswagen AG-backed EV startup that went public in 2020.
The company specializes in creating solid-state lithium-metal batteries. These kinds of batteries tend to extend the range electric vehicles can travel before they hit zero, and make them recharge faster when they do.
And QuantumScape has only recently started to test its battery technology at scale and plans to produce more than 200,000 batteries annually.
In fact, the company expects to deliver prototype battery samples to EV automakers sometime this year. The battery manufacturer's plan is to provide batteries for cars in 2023 and then begin commercial production in 2024 or 2025.
Despite being relatively new to the scene, QuantumScape is spending heavily to bring its tech to the market. The company spent a whopping $273 million in 2021, and it ended the year with $1.4 billion in cash on its balance sheet. That leaves plenty of money for the company to invest in its commercial goals.
While QuantumScape has a strong enough balance sheet to cover a few more years of development and testing, it's worth noting that this can be a relatively risky investment. If its experimental batteries turn out to be duds or are a commercial flop, then QS's stock would be worthless.
There are certainly more stable, proven battery stocks - but with QuantumScape, it's a high-risk, high-reward situation. This is a very promising EV battery company with high growth potential in an expanding and evolving industry.
At the time of writing, QuantumScape stock is valued at $15.25 per share. And analysts over at CNN expect shares of QS to hit $30 over the next 12 months.
If you were to add shares of QS to your portfolio today, you could see gains of 90% within a year - that's not considering how much higher this particular stock can grow as demand increases.
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The world's richest investors - like Kevin O'Leary of "Shark Tank" and big banks like Morgan Stanley - have started investing in this groundbreaking new market.
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