With climate change and geopolitical flashpoints converging this year, it may be time for investors to consider the top battery stock picks for 2023. While the process may take longer than many analysts anticipate, at some point, the future of mobility and energy infrastructures will depend on advanced battery technologies. And these ideas just might position you for exceptional gains.
Not only that, the robust November jobs report – where the U.S. economy added 263,000 jobs versus an anticipated 200,000 – could spark discounts among battery stock picks for 2023. With the Federal Reserve recognizing that its efforts to contain inflation through higher interest rates effectively failed, the gloves may come off. This spells even higher rates, which may negatively impact equities.
True, that might make battery stock picks for 2023 volatile. However, keep in mind the bigger picture. With this market segment, you’re dealing with the industries of tomorrow. If you’re going to speculate, you might as well do it here.
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A specialty chemicals manufacturing firm based in Charlotte, North Carolina, Albemarle (NYSE:ALB) operates three divisions: lithium, bromine specialties, and catalysts. According to its public profile listed on Google Finance, Albemarle represented the largest provider of lithium for electric vehicle batteries (as of 2020). To be fair, ALB isn’t a direct play among battery stock picks for 2023. Still, it brings stability to the mix.
On a year-to-date basis through the Dec. 5 close, ALB gained a hair over 12%. In contrast, the benchmark S&P 500 slipped nearly 17% during the same period. Fundamentally, Albemarle brings much relevance to the table for long-term investors. To be sure, ALB did drop almost 7% on the aforementioned Monday session, which may offer a quick discount for contrarian investors. Financially, ALB still enjoys room for additional capital growth. Currently, the market prices ALB at 10.4 times forward earnings. In contrast, the sector median is 14.6 times or ranked favorably lower than nearly 63% of the competition.
A multinational industrial and applied sciences conglomerate, Honeywell (NASDAQ:HON) offers arguably the most balanced profile among the battery stock picks for 2023. Also headquartered in Charlotte, Honeywell primarily operates in four areas of business: aerospace, building technologies, performance materials, and technologies. It also commands relevancies in safety and productivity solutions. Essentially, if the company’s battery unit doesn’t pan out, investors enjoy myriad other reasons for owning HON.
However, Honeywell brings an enticing angle regarding battery stock picks for 2023, and it all centers on its innovative flow battery technology. Per the accompanying press release, the non-flammable flow battery facilitates a safer, more durable solution for large-scale renewable energy storage. With many countries pivoting toward renewable solutions amid geopolitical flashpoints, Honeywell may have a home run on its hands.
To be fair, HON probably represents a slow-cooking investment among battery stock picks for 2023. Per Gurufocus.com and its proprietary calculation for fair market value (FMV), HON trades at just that, FMV. Still, factor in the upside potential for the flow battery tech, and it could actually be undervalued.
Sociedad Quimica (SQM)
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A Chilean chemical company, Sociedad Quimica (NYSE:SQM) consistently ranks among the indirect plays for the EV rollout. While investors should be careful about overextending themselves to buy SQM, it does represent one of the battery stock picks for 2023. Fundamentally, seemingly everyone’s competing for dominance in the EV production race. Naturally, that’s a net positive for SQM, which specializes in lithium production.
Further, geopolitical elements bolster the case for the lithium miner. First, China aims to dominate the EV market, which invariably inspires competition from western nations. Second, SQM benefits from underlying geographical realities. To make a long story short, historical conflicts rendered Chile’s neighbor Bolivia a landlocked nation. It remains a contentious issue. However, for now, the hegemony of Chile’s long coastline theoretically provides SQM with a major regional advantage.
To be 100% transparent, SQM gained 87.5% YTD. Also, Gurufocus.com labels SQM as a possible value trap. Still, if you’re interested in battery stock picks for 2023, the underlying company’s outstanding profit margins – where it easily ranks within the sector’s top 10% — make for an intriguing long-term investment proposition.
One of Japan’s top consumer electronics firms, Panasonic (OTCMKTS:PCRFY) through the 1980s and 1990s generated tremendous buzz for its products. However, as the 2000s decade got moving in earnest, the company lost much of its magic. However, Panasonic still commanded tremendous intellectual properties regarding battery technologies. Today, it’s perhaps best known stateside for undergirding Tesla (NASDAQ:TSLA) EVs.
To be sure, Tesla witnessed some of its magic fade. Skyrocketing to phenomenal heights throughout much of the new normal, circumstances worsened dramatically in 2022. Since the January opener, TSLA plunged over 54%. However, the Tesla brand remains the dominant force in the EV sector. And thanks to the company’s longstanding partnership with Panasonic, PCRFY’s future seems bright as well.
Speaking bluntly, most analysts will probably classify Panasonic’s financials as “okay” – not great, not terrible. However, the market prices PCRFY at just under 10 times forward earnings. In contrast, the sector median is 15 times, making it a solid idea among battery stock picks for 2023.
FREYR Battery (FREY)
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A relatively new enterprise, FREYR Battery (NYSE:FREY) was founded in 2018 and made its public market debut last year. Per its website, Freyr aims to provide industrial-scale clean battery solutions to reduce global emissions. Currently, the company features three main business units: energy storage systems, eMobility, and EVs.
In addition, management has bold ambitions. Primarily, its “planning to develop up to 43 GWh [gigawatt hours] of battery cell production capacity by 2025 to position FREYR as one of Europe’s largest cell suppliers.” As well, Freyr laid the groundwork for a new battery-producing factory called Giga Arctic, making it an attractive long-term idea for forward-thinking investors.
Currently, Freyr represents a mix of intriguing and also concerning financial metrics. To get the bad news out of the way first, the company at the moment suffers from poor business quality. Its return on equity and return on asset sit in negative territory. On the other hand, Freyr enjoys a strong balance sheet, with a cash-to-debt ratio of 32 times.
If you can handle the whims of aspirational narratives, FREY may be one of the battery stock picks for 2023 to consider.
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For the final two ideas on this list of battery stock picks for 2023, we’re going to dive into the speculative arena, beginning with QuantumScape (NYSE:QS). Initially, QS stock garnered astonishingly bullish attention because of its core focus: the development of solid-state batteries (SSBs). Considered the holy grail of battery technology, SSBs theoretically combine safety, scalability, and immense energy density.
The latter point represents a strong marketing pitch because of range anxiety. Should commercially viable SSBs enter the market, this fear of an EV losing juice at inopportune moments could diminish substantially. However, SSBs so far demonstrated their potential via lab tests or in small, controlled frameworks. Transitioning from that to powering full-sized EVs is another matter altogether.
To be completely transparent, I haven’t exactly been a fan of QuantumScape in recent months. However, with QS stock dropping over 68% YTD, I suppose an argument exists that it’s oversold. If you want to take a potshot with loose change here, it may be worthwhile.
Founded in 2006, Microvast (NASDAQ:MVST) is a battery manufacturer. Specifically, the company focuses on developing lithium-ion batteries for EVs and energy storage systems. It also features manufacturing bases in China, Germany, and here in the U.S.
Fundamentally, Microvast appeals to investors because of its strong underlying relevancies. Per a CNBC report, EV sales are scheduled to hit an all-time high in 2022. To be transparent, macroeconomic headwinds may pressure such sales in the future. Still, for now, Microvast enjoys a compelling addressable market.
As well, energy storage systems are no slouch either. Per Precedence Research, this segment can hit $435.32 billion by 2030. Therefore, even if the EV thing doesn’t pan out, Microvast enjoys a strong niche sector.
Still, as a former merger candidate for a special purpose acquisition company, MVST presents serious risks. Since the start of the year, shares lost nearly 66% of their equity value. Therefore, it’s worthwhile among battery stock picks for 2023 but only for controlled speculation.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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