Stocks heading higher on hopes of a debt limit deal may have emboldened corporate insiders to purchase company stock. Buying was robust for the second week in a row, led once again by financial stocks pulled down by regional bank concerns.
But, like last week, we are headed in a different direction despite the many regional/small bank stocks on this week’s roster. Instead, we are going green with Albemarle Corporation (ALB). Albemarle is a global specialty chemicals company that operates in three business segments: Lithium, Bromine Specialties, and Catalysts.
The Lithium segment is Albemarle’s largest and most significant business, accounting for a significant portion of its revenue. Albemarle is a major player in the global lithium market, which is driven by the increasing demand for lithium-ion batteries used in electric vehicles, energy storage systems, and other electronics.
Since May 5, 2023, a trio of ALB insiders bought the chemical company’s stock. Eric Norris, President, Energy Storage acquired 1,260 shares at $195.49, investing $246,317; Chairman and Chief Executive Officer (CEO) Kent Masters bought 5,470 shares at $181.64 for a little less than $1 million; and Executive Vice President (EVP) and General Counsel, Kristin Coleman purchased 1,373 shares at $182, spending close to a quarter-million dollars. (1)
For Coleman, it was her first action in ALB. (2) Her only other activity was selling Brunswick Corporation (BC) a couple of times. CEO Masters was also nothing but a seller of stock, primarily Foster Wheeler (now private) and ROC Energy Acquisition Corp. (ROC) once before his first million-dollar bite of ALB in February. (3)
While maiden buys are always interesting, we prefer insiders that have a history of being on the right side of the trade. Norris first purchased ALB in 2019 at $34.66, investing $199,790. Almost two years later, he made his first sale of three at $158.16. The President, Energy Storage sold twice more, at $237.26 and $307.80, collecting more than $3 million. Now, Norris is back in the buy column. (4)
Maybe the trio see some short-term opportunity in ALB as Wall Street has a one-year price target of $264.10. (5) The stock last traded at $204.15, which translates into approximately 30 percent upside to the street’s target. But it’s possible they have a longer time horizon in mind.
According to Statista, “In 2030, the global demand for lithium is expected to surpass two million metric tons of lithium carbonate equivalent, more than doubling the demand forecast for 2025. Increases in battery demand for electric vehicles will be a strong driver of lithium consumption in the next decade.” (6)
Global Battery Alliance added some more color, “McKinsey Battery Insights team projects that the entire lithium-ion (Li-ion) battery chain, from mining through recycling, could grow by over 30 percent annually from 2022 to 2030, when it would reach a value of more than $400 billion and a market size of 4.7 TWh.” (7)
If these projections prove to be accurate, then Albemarle should make a lot of money with an operating profit margin of 38.14 percent. Its return on equity (ROE) of 49.18 percent is off the charts, in our view.
OVERALL: Albemarle Corporation (ALB) could be a long-term investment for investors looking for exposure to Lithium, which is expected to experience above average growth rates through 2023 due to demand for electric-vehicles (EV).
ALB is only for investors with above-average risk tolerance and at least a 12-18 month time period.
1 – https://www.secform4.com/insider-trading/915913.htm
2 – https://www.secform4.com/insider-trading/1464051.htm
3 – https://www.secform4.com/insider-trading/1396415.htm
4 – https://www.secform4.com/insider-trading/1624621.htm
5 – https://finance.yahoo.com/quote/ALB?p=ALB&.tsrc=fin-srch
6 – https://www.statista.com/statistics/452025/projected-total-demand-for-lithium-globally/
7 – https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/battery-2030-resilient-sustainable-and-circular
8 – https://finance.yahoo.com/quote/ALB/key-statistics?p=ALB