Image Source: Pixabay

What if you had the chance to invest in oil when it was cratering at a dollar a barrel? I believe that's where we are now when it comes to battery technology suppliers. Car manufacturers around the world have announced that they are converting most or all of their production over the next 15 years to electric technology. The overwhelming demand for batteries to supply this technological leap will be enormous.

Battery production relies on lithium-ion technology and currently the main suppliers of the minerals needed to meet this demand are in China, which controls more than 70% of the world's supply of rare earth materials.

A few years ago, we saw a run up in the share price of companies associated with this business, but that soon fizzled since the only major demand was being produced by Tesla (TSLA). That has now changed with dozens of automotive manufacturers getting into the act. The demand is bound to increase and overshoot supply, at least in the medium- to long-term.

It's not just automotive manufacturers who will be requiring huge amounts of lithium and other related materials like nickel. Solar industries will require backup batteries and even large industrial and civic installations will increasingly require large amounts of storage.

Lack of storage is one of the weaknesses of the renewable energy complex and there's a huge amount of money being invested to try and rectify this problem. One only has to look at Texas and its recent grid meltdown to realize where the future will be going if we don't want our citizens freezing in the dark.

We recognized this trend in 2016 when we recommended the Global X Lithium and Battery Technology ETF (LIT). Back then it was trading at US$24.56. It recently closed at US$58.32 for a gain of around 148%. This ETF tracks a market cap weighted index of 20 to 40 companies involved in the global mining and exploration of lithium or in lithium battery production.

It’s a good way to get overall exposure and it gives you a nice global spread as well with companies based in China (30% of the fund), the United States (22%), and Hong Kong, Korea, Japan, Australia, etc.

We also recommended the Van Eck Vectors Rare Earth Strategic Metals ETF (REMX) back in 2010, but sold it in 2014 before the sector started to heat up. This ETF has a very narrow number of holdings with only 21 companies. A large number of them are focused on China, which adds some risk and volatility, but the fund has performed extremely well recently, up 107% this past year.

I think you could add to both of these funds as a long-term bet on the electrification of our transportation and grid system.