Taking Advantage of a Disparity in Lithium Stocks’ Performance

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I have said it before a few times, but, in general, if a market move doesn’t make sense to me, the first thing I do is check my own assumptions. It is, after all, much more likely that I have made a mistake in my analysis than it is that the collective wisdom of thousands of highly paid experts has missed something important. Every now and again, though, try as I might, I cannot see why a particular stock is being bought or sold, or why there is a disparity in performance within a sector or industry.

Lithium stocks are right now a puzzle in both of those senses.

There are basically three investable companies in the space: Albermarle (ALB), Sociedad Química y Minera de Chile S.A. (SQM), and Lithium Americas Corp. (LAC). You might think that they would move pretty much in lockstep, as do most groups of commodity mining stocks, based on the price and prospects of the commodity that they produce, but over the last month, that has definitely not been the case.

The chart above compares LAC, the shaded blue mountain chart, with ALB, the blue line, and SQM, the green line. As you can see, the best performer has been SQM, with ALB right behind. They both have double digit gains over the last month, but LAC has actually dropped over 4%.

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