Lithium has been one of the leading investment thematics of the last few years, as the price for the battery metal soars as the world becomes more electric.
It really has been a pile on, as investors scramble to gain some exposure. It's natural then to question whether lithium has become a crowded trade.
Tim Carleton from Auscap Asset Management admits that lithium may well be a crowded trade, but "crowded trades can work."
For anyone who thinks we're not going to get to 100% electric vehicle penetration; Norway's already at 90%.
Carleton draws comparison with the coal seam gas boom that quickly followed the Global Financial Crisis.
"Because of the demand for those resources, basically every asset worth its salt got taken out by a global major."
The same dynamic is playing out in lithium, where the small lithium plays are bought out by majors who are scrapping to buy growth rather than grow it organically, given the lead time that exists for developing quality assets.
Ultimately, even in spite of a recent pullback in the price of lithium, "you still get valuations that are far north of where the share price is."
It all boils down to the fact that crowded trades can work, as long as you can stomach the short term volatility that comes with them.
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