Saturday, 5 October 2024
by BD Banks
Arcadium Lithium (NYSE: ALTM) stock soared 12.1% through 10:55 a.m. ET Friday after rumors emerged that the company may be a candidate for a buyout.
Australian daily newspaper The Australian reported this morning that British mining giant Rio Tinto Group may be looking to expand into the lithium industry. More specifically, the paper noted that Arcadium Lithium and Albemarle are two lithium miners that have caught Rio’s attention.
Commenting on the Australian story, Barron’s pointed out today that lithium prices are in a funk, and that lithium stocks look cheap. Arcadium Lithium in particular, which cost north of $13 a share just a couple of years ago, was recently trading below $3 a share (it’s back up above $3 on this new news).
With the stock trading at an 80% discount to what it used to cost, Barron’s muses that “buying low is always a good idea” and Rio “might also be trying to buy at the bottom of a commodity cycle.”
Admittedly, this smacks a bit of trying to “time the market,” and we all know how hard that can be to do well.
Still, if there’s anyone who has a good grasp of this cyclical sector, and how big of a decline in prices is needed to signal the bottom of a cycle and the likelihood of an upswing, well, it’s probably Rio Tinto — which has been in the mining business for more than 150 years after all.
What’s more, if Rio Tinto is looking for a lithium stock to buy, then Arcadium Lithium is probably one of the best candidates out there. Whereas bigger names such as Chile’s Sociedad Química y Minera de Chile are just barely profitable at present, and Albemarle is actually losing money, Arcadium Lithium reported $226 million in profits over the last 12 months, and trades at an attractive 13.3 times trailing earnings.
If Rio Tinto is looking to do a deal, it need look no farther than Arcadium Lithium stock.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.