Will Tesla Motors Inc’s Gigafactory Charge Up The Lithium ETF?

American firms dominate the portfolio with 43% share while Taiwan, Japan and South Korea round off to the next three spots with a single-digit allocation. From a sector look, the ETF is heavy on materials with 53% share, closely followed by consumer cyclical (17%) and industrials (16%) (see: all the Material ETFs here).

The fund is highly concentrated on the top two American firms – FMC Corp (FMC) and Rockwood Holdings (ROC) – which collectively make up for nearly 37% of total assets. Other firms hold less than 7.1% in the basket. Additionally, the product has a slight tilt toward mid cap securities, which account for nearly half of the portfolio. The remainder is split between mid and small caps.

LIT is up 7.5% so far this year (as of September 5, 2014). Following the selection of Tesla’s “Gigafactory” location, the fund has remained in positive territory.

Bottom Line

Like many other mineral producing funds, LIT was also an underperformer in 2013 losing about 12%. However, the product bounced back this year by gaining about 6.6% in Q1.

Though the trend turned soft from the second quarter as the metal and mining investing lost some appeal, we expect the pricing to gain momentum once the Tesla factory becomes operational. However, since Tesla’s Gigafactory will not likely start production before 2017, investors need to have a long-term view while investing in the Lithium ETF.

This article is brought to you courtesy of Zacks.

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