Investors have many ways to play the “green wave,” or the pivot to a net-zero carbon world, but alongside EV stocks, hydrogen fuel cell stocks, solar stocks and other renewable energy plays, battery stocks are another strong choice.
A big reason is that the pivot away from fossil fuels will not happen without advanced battery technology.
These types of stocks could make for a great way to gain broad exposure to this megatrend. Having said that, while the battery space offers broad EV/renewable exposure, don’t assume buying any stock in this category is a worthwhile or potentially profitable move.
With this in mind, let’s take a look at seven stocks in this sector, all of which are charging ahead and rightfully belong in the best battery stocks category.
Amplify Lithium & Battery Technology ETF (BATT)
Speaking of broad exposure, there is a way to spread your bets widely in the area of battery tech: through an investment in the Amplify Lithium & Battery Technology ETF (NYSEARCA:BATT).
Battery stock exchange-traded funds like BATT provide investors with exposure to leading U.S.-listed names in this space — some of which will be discussed in further detail below. BATT also has holdings in foreign-based battery technology companies that are difficult for stateside investors to buy. Some examples include China-based CATL, as well as South Korea-based battery companies LG Energy Solution and Samsung SDI.
BATT is smaller than its competing fund — Global X Lithium & Battery Tech ETF (NYSEARCA:LIT). Still, BATT has a lower expense ratio of 0.59% versus 0.75% for LIT — despite similar holdings. That may give it the edge if you’re looking to add battery tech exposure via ETF ownership.
BYD (OTCMKTS:BYDDY) may be considered one of the top EV stocks, but this China-based company is also one of the top battery stocks as well. In fact, before becoming one of the leading Chinese makers of battery electric and hybrid vehicles, BYD made its bones in the battery technology space.
BYD’s leadership in this industry continues. As InvestorPlace’s Muslim Farooque noted last month, BYD is the world’s second-largest battery maker. The company not only uses its lithium iron phosphate (or LFP) batteries in its own cars but sells them to other automakers.
For example, Tesla (NASDAQ:TSLA) uses BYD batteries in some of its models. Toyota (NYSE:TM) is another automaker counting on BYD’s battery technology to help charge its vehicle electrification efforts. Crushing it in both the EV and EV battery industries and reasonably priced at 19 times forward earnings, consider BYD stock worthy of a buy.
Freyr Battery (FREY)
Freyr Battery (NYSE:FREY) is one of many early-stage battery technology stocks that has gone public via a special purpose acquisition company (SPAC) merger in recent years. But the stock’s performance since its debut can best be described as horrendous.
Yes, FREY stock did experience a strong extended rally in 2022, thanks to perceptions that the battery developer would benefit greatly from the U.S. Inflation Reduction Act. However, the stock has cratered in the past year, falling more than 80% below its original SPAC price of $10 per share.
Per Freyr’s latest investor presentation, the company continues to charge ahead with its technological development and manufacturing build-out efforts. Even so, Freyr is experiencing heavy cash burn. It also had to significantly scale back said efforts. As such, until the situation improves, there’s little reason to try and catch the falling knife that is FREY stock.
ESS Tech (GWH)
ESS Tech (NYSE:GWH) is another battery-focused deSPAC that has fallen out of favor with investors. GWH debuted at $10 per share and — at one point — traded for above $20. Today, however, the stock changes hands for only $1.18 per share.
But while GWH stock has fallen into the market’s equivalent to the battery recycling center, it’s possible ESS Tech has not yet reached the “down and out of the running” stage. Why? Largely because this company, focused on long-duration energy storage (i.e., batteries to store energy derived from solar and wind), recently gained a high-profile backer — Honeywell (NASDAQ:HON).
In September, Honeywell invested in ESS Tech as part of a strategic collaboration between the two companies. Partnering up with Honeywell may give this startup a shot of hitting success in an area that stands to grow considerably as the grid goes green.
Panasonic Holdings (PCRFY)
Panasonic Holdings (OTCMKTS:PCRFY) is one of the best battery stocks that U.S. investors can purchase. Through ownership of this Japan-based industrial company’s U.S.-listed ADRs (which trade in the over-the-counter market), you can add exposure to an established and profile contender in the EV battery industry.
Yes, Panasonic’s battery technology unit is not its largest operating segment. However, this may work to your advantage. Right now, PCRFY stock trades for just nine times forward earnings. Investors continue to value the company similar to that of other Japanese industrial conglomerates.
But assuming Panasonic continues to scale up its automotive battery unit (internal targets call for this segment to grow nearly fourfold between now and 2031), besides rising in line with earnings growth, the market could start to factor in the company’s evolving status more into its valuation, resulting in substantial multiple expansion.
Speaking of EV battery stocks, QuantumScape (NYSE:QS) is one of the first names that comes to mind for many investors. Yet, while shares for this developer of solid-state batteries (SSBs) for EVs may be one of the more high-profile stocks in this category, whether it’s one of the best is debatable in my view.
I’ll admit that QS stock, down nearly 96% from its all-time closing high, would undoubtedly spark a massive recovery for shares if the company manages to make a breakthrough in bringing SSBs to market.
However, as I’ve said before, between execution issues, heavy cash burn/shareholder dilution and rising competition, it appears more likely that QS stock will keep sliding. While the company has yet to throw in the towel, steer clear of shares.
Solid Power (SLDP)
Solid Power (NASDAQ:SLDP), is another publicly-traded startup focused on developing SSBs for EVs. As I’ve pointed out before, Solid Power has strategic partnerships with major automakers. Just like QuantumScape, it has yet to give up on its efforts, even as enthusiasm and investment in this industry have dried up.
Also, just like QuantumScape, Solid Power is facing issues like cash burn and the threat of competition. However, from a risk/return standpoint, SLDP stock appears to be a more worthwhile “moonshot” wager than its higher-profile peer.
For instance, SLDP trades at a discount to its book value, whereas QS still trades at a premium based on this metric. Solid Power has also moved out of the pre-revenue stage (as seen in its latest earnings release). Although it’s best to tread carefully, if you’re interested in QS, you may want to take a look at SLDP first.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.