Canada’s Best Performing Stock in 2021

Here’s a hint: EVs

Andrew Willis 29 December, 2021 | 4:28AM
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Andrew Willis: It might come as no surprise that the top-performing Canadian stock we covered in 2021 is a lithium stock. But what if I told you it was still trading at a discount to our fair value estimate?

Lithium Americas Corp (LAC) was propelled around one-hundred-and-fifty percent year-to-date as of December 6th by a flurry of activity – and speculation – surrounding the electric vehicle space. Potentially landing in the top five lithium producers globally, it’s a great pure-play approach to addressing the demand for batteries at the heart of the space.

And while demand for lithium seems definite, what we really like about this stock is its potential to be a low-cost supplier. Senior equity analyst Seth Goldstein explains that while planned mines in Argentina will produce less concentrated liquid brine than peers in Chile, and thus take more of it to extract lithium, it’ll be paying less in royalties and taxes.

This apparent difference in production might explain the current discount to our fair value estimate, but we note that the lower royalties already make up much of the gap. It’s also nice to see a recent bond offering with a conversion price near our estimate – but we’ll be keeping our ‘very high’ uncertainty rating until the production comes online…

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Lithium Americas Corp37.69 CAD4.03Rating

About Author

Andrew Willis

Andrew Willis  Senior Editor at Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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