Commodities, Lithium and Chile

Focus: STOCKS

Nicholas Vardy Image Nicholas Vardy Editor, Bull Market Alert, The Alpha Investor Letter, and The Global Guru

Our latest buy recommendation is an indirect play on the bounce in commodity prices, asserts global expert Nicholas Vardy, editor of Bull Market Alert.

Lithium producer Sociedad Química y Minera de Chile S.A. (SQM) is a chemical and mining company with its headquarters in Santiago, Chile.

SQM produces iodine and its derivatives, lithium and its derivatives, industrial chemicals, potassium and other products and services.

Here’s why I expect SQM to continue its recent rally even as markets consolidate their gains.

First, the global market for lithium is expected to at least double by 2020. This is driven by increasing demand for rechargeable batteries, which are used to power consumer electronics and electric vehicles.

You may have heard that Tesla Motors (TSLA) is constructing the Gigafactory, which will produce rechargeable batteries for half a million vehicles by 2020.

Second, SQM has a major competitive advantage in the production of lithium. It owns the brine fields of the Atacama Desert in Chile which contain the world’s largest source of lithium brine -- the most cost-effective source of lithium.

Finally, SQM’s shares surged last week by 9.5% on news that Chilean holding company Oro Blanco is considering selling its Pampa Calichera subsidiary, which owns approximately 20% of SQM.

Any rumor of the sale of a big chunk of SQM drives speculation that the price of SQM is set to go higher.

Sociedad Química y Minera de Chile S.A. has been hitting new highs.