In this article, we reviewed the 10 best cobalt stocks to buy for 2021 and why most market research firms were bullish on cobalt stocks. You can skip our detailed discussion of these stocks' relevance and go to 5 Best Cobalt Stocks To Buy For 2021.
Cobalt is fast becoming one of the most sought-after commodities in the world. According to a report by New York-based leading business intelligence firm Expert Market Research, the global cobalt market witnessed a demand of 115.54 kilo tons in 2020. The market is further expected to grow at a compound annual growth rate of 9% between 2020 and 2026 to reach a volume of 193.77 kilo tons by 2026. Industry experts believe that the need for the hard and silvery metal could grow four times the current demand in the coming years.
Growth Catalysts for Cobalt Stocks
The need for cobalt is driven by its use in several items critical to the world economy. Cobalt is a by-product of mining nickel and copper from the earth. The metal has to be processed before it can be made available in the market. Most of the mines where cobalt is found, sites of nickel and copper mining, are located in the Democratic Republic of Congo, China, Australia, Russia, Canada, and some other countries. However, most of the cobalt processing facilities are in China even though it only produces a fraction of the total Cobalt in the world.
This is partly to do with the high demand of cobalt in China. The metal is mainly used in lithium-ion batteries and semiconductor chips that are used in electronic devices and vehicles. Although it has other uses as well, it is estimated that more than 41% of refined cobalt is used in batteries. The metal is used together with nickel in these batteries, and there is as yet no commercially viable alternative to this pairing in the market. Since China is the largest manufacturer of electronics in the world, the country has a monopoly on the import of the metal.
As climate change ushers in the era of electric vehicles, more and more cobalt is being refined for use in electric vehicle (EV) batteries. Typically, an EV battery requires 9 kilograms of cobalt whereas a smartphone battery only requires about 30 grams. Since the EV boom is just beginning, it is unlikely that cobalt demand is going down soon. One of the best ways for investors to take advantage of this situation is by buying shares in the companies that are mining nickel and copper, and by default, cobalt, around the world.
At the end of 2019, most market research firms were bullish on cobalt stocks. However, the onset of the pandemic slowed down business. The grounding of aircraft - cobalt-based alloys are used in jet engines - hit the demand for the metal in the United States and Europe. Elsewhere, the demand slowed as the coronavirus hit supply chains. Mining disruptions in African nations like Morocco and Madagascar also affected prices. With 2021 well underway, there is still a lot of concern around the cobalt industry in the finance world.
This is not altogether surprising. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this industry context in mind, here are the top 10 best cobalt stocks to buy in 2021 as the coronavirus shadow recedes and the aviation industry takes off, more EVs hit the road, and record numbers of electronics are manufactured in factories around the world.
Best Cobalt Stocks to Buy Now
10. Panoramic Resources (ASX: PAN.AX)
Panoramic Resources (ASX: PAN) is a mining company that explores, evaluates, develops and produces mineral deposits. The firm has stakes in nickel, gold, platinum group minerals, exploration projects in Australia, and exploration projects overseas. Some of the projects it is working on include the Savannah Nickel Project and Copernicus Nickel Project, the Gum Creek Gold Project; and the Panton PGM Project. The overseas operations of the firm are mostly based in northern European countries.
The market cap of the firm is estimated to be over $226 million and it posted a revenue of $45 million in December 2020. Earlier this month, the company disclosed that it was restarting a nickel project in Western Australia that had been put on hold in 2016 for maintenance. The mining work on the site is expected to start later this year. Usually, cobalt is found alongside nickel in a chemically combined form in mines. As the company starts work on another nickel mine, it is placed 10th on our list of top 10 best cobalt stocks for 2021.
9. Glencore (LSE: GLEN.L)
Glencore (LSE: GLEN.L) is a Switzerland-based multinational corporation that is one of the largest producers of cobalt in the world by virtue of mines in the Democratic Republic of Congo and operations in Australia, Canada, and Norway. The company has interests in copper, cobalt, nickel, zinc, lead, chrome ore, ferrochrome, vanadium, alumina, aluminum, tin, and iron ore. It also does oil exploration, production, distribution, storage, and bunkering, offering coal, crude oil, and natural gas to different companies globally.
The company has a market cap of $53 billion and posted more than $140 billion in revenue in December 2020. Last month, the company announced that Tony Hayward, the chairman of the firm, would be stepping down from his role next year. Hayward has overseen the company for the past nine years. The shares of the firm have been steadily rising over the past few months on the back of increased copper and battery metal demand. Glencore is placed 9th on our list of top 10 best cobalt stocks for 2021.
Freeport-McMoRan Inc. (NYSE: FCX) is an Arizona-based mining company with stakes in copper mining in the Democratic Republic of Congo in partnership with other companies. Cobalt is a by-product of copper mining. The firm has mining interests in South America and Indonesia as well. Freeport-McMoRan mines copper, gold, molybdenum, silver, and other rare metals, in addition to oil and gas. The firm operates more than 150 wells around the world, with the oil assets primarily in California.
It has a market cap of more than $50 billion and posted a revenue of more than $14 billion in December 2020. As the world economy reopened following the vaccinations against the pandemic, the demand for copper from China and US drove the shares of the firm to new highs in March. The demand for the metal is expected to touch new highs this year as China pursues a clean energy drive, prioritizing the manufacture of electric vehicles that need copper and cobalt in handsome quantities. The firm is 8th on the list of top 10 best cobalt stocks for 2021.
As of the end of the fourth quarter, 61 hedge funds in Insider Monkey’s database of 887 funds held stakes in FCX, compared to 57 funds in the third quarter. Fisher Asset Management is the biggest stakeholder in the company, with 42.9 million shares, worth $1.1 billion.
7. China Molybdenum Co., Ltd. (HKSE: 3993.HK)
China Molybdenum Co., Ltd. (HKSE: 3993.HK) is a Luoyang-based company engaged in the mining, smelting, processing and trading of metals. The company is one of the largest producers of cobalt in the world, also through mining interests in the Democratic Republic of Congo (DRC). The company is one of the rare firms that mines and refines the cobalt metal. In 2018, this led to the overflow of cobalt in the markets as China smelted more cobalt to drive down prices. The company is also famous for the mining of many rare-earth elements.
The firm has a market cap of over close to $20 billion and posted over $17 billion in revenue in December 2020. Late last year, the company purchased a stake in another cobalt ore project in DRC, where a mine holds an estimated 3.1 million metric tons of the metal. The sales of cobalt for the firm increased by nearly 15% in 2020 compared to 2019. After a slow 2020, the metal is expected to increase in demand in 2021. The Chinese mining company is 7th on our list of top 10 best cobalt stocks to buy for 2021.
Vale S.A. (NYSE: VALE) is a Brazil-based metals and mining company. The firm has interests in ferrous metals, base metals and the coal segment of the mining industry. It produces iron ore, manganese, ferroalloys, nickel and its by-products, such as copper, gold, silver, cobalt, and precious metals. The company is also in the business of extracting metallurgical and thermal coal. The company focuses on mining and selling of nickel and has plans to expand in the area.
It has a market cap of over $92 billion and posted more than $40 billion in revenue in December 2020. Earlier this month, the company announced that it had approved a plan to buy back at least 270 million shares. The firm said that the buyback plan signaled to investors that the shares of the firm were grossly undervalued. The number of shares being bought back equal 5.3% of all outstanding shares. The Brazilian firm comes sixth on our list of top 10 best cobalt stocks to buy for 2021.
There were 35 hedge funds that hold a position in VALE S.A. The biggest stakeholder of the company is Fisher Asset Management, with 40.3 million shares, worth $675.5 million.
