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Pro Series: The Resource Revolution

It All Comes Down to the Supply Chain

A theme has already emerged for any business looking for success in the 2020’s: protect your supply chain.

A global pandemic. An uncertain war. Endless crippling shortages. All of these grim voices add up to a single chorus about the primary importance of resources — where they come from, in what supply, and at what cost.

In this tumultuous decade, the companies that protect their supply chains will be the ones to prosper.

We've seen this affect every sector in the market. Breakdowns in the supply chain have had enormous effects on computer chips and solar panels. 

But interruptions are so widespread that they’ve reached into forgotten corners of the market… as we saw with lumber all throughout 2021 and early 2022. And then last year the supply chain came up short on cream cheese, avocados, baby formula, tampons, and pet food. Which brings us to today — where we’re experiencing a nationwide shortage of eggs. I took this photo this morning…

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Empty shelves in the egg section of a Virginia grocery store.

And I was lucky! There were still 5 cartons left (albeit with the drawback of 2-3 broken eggs per carton). The point is this: no supply chain is safe from the disruptive forces wreaking havoc on our global, interconnected world.

And make no mistake: this is about a lot more than just a few missing eggs for breakfast. The resource shortfalls we’re following are massive, world-shifting events.

As investors, we’re most concerned about the looming crisis for these five key resources:

  1. Copper — essential to EVs, the power gird, and thousands of industrial uses
  2. Lithiumessential to EV batteries, plus billions of laptops and cellphones
  3. Gold Central Banks are stockpiling, industries are expanding uses
  4. Uraniumthe US and Europe are trying to shake free of Russia’s stranglehold
  5. Rare earthsessential to EVs, medicine, and tech. Global tension over new sources

You’ve no doubt seen the headlines for many of these — and those headlines are going to continue. 

But we’re also keeping a close eye on a short list of other unexpected resources that aren’t getting much attention (yet). 

These resources are disappearing under sudden spikes in demand, with solutions for resupply in sight. One of these is helium. It’s not just party balloons — helium is an essential industrial and medical gas. Most critically, it’s used in MRI machines, where it helps cool the magnets, and no suitable alternatives exist.

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We’ve focused our research on critical raw materials, because without them the rest of the supply chain collapses.

This has been especially important in the fast-growing multi-billion electric vehicle (EV) space. This market is large, growing at an enormous pace, and is especially dependent on a few key resources — making it one of the most important resource plays in the world.

Companies are quite aware. Investment banking consultancy Piper & Sandler doesn’t think it’s even possible for car companies to meet their goals, due to the impact of the resource crisis:

“EV sales targets for 2030 are probably unachievable because of constraints on various raw materials.”

We’re already seeing the effects of those shortages. Tesla blamed missed delivery targets on the lack of reliable resources. So has Rivian. So has GM. And the decade is only beginning! From all the numbers we’re looking at, this theme is only going to deepen and develop. 

As Bloomberg put it: 

Automakers are facing delayed deliveries across the EV space, exacerbating supply-surety concerns.”

But it’s not only missed delivery dates. There’s also a direct correlation between material costs and profitability.

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And where the need is greatest, that’s where the profits are sweetest. As Chris Berry, president of industry firm House Mountain Partners, recently said, car companies are so motivated to get more lithium that they’re willing to: 

“…stuff money into a bazooka and just blast it at the supply chain.” — Chris Berry, House Mountain Partners

In times of crisis, profits flow up the supply chain to its source — and that’s where you’ll find our coverage at Profit Cycle Pro.

Make it your own,

John Carl
Profit Cycle Pro

Looking for More on Resources Stocks? 

An Update from Nick Hodge: Why EVs Have NO Alternative to Lithium

America needs more lithium ASAP. And let me be clear: lithium doesn’t mean a new EV technology… or a new alternative battery technology… it means lithium. There is no new battery savior.

You may occasionally see splashy headlines that tease a “new” battery metal that’ll make lithium obsolete. Don’t believe it. While innovation will certainly continue — as it always does — there is nothing, and I mean nothing that will take lithium’s place for the next decade… possibly longer.

It’s taken since 2010 to build the supply chain we already have… more than 12 years!

And it’s taken billions of dollars, millions of man-hours, and thousands of mining permits to do it. Now that the EV industry is manufacturing 6 MILLION cars a year (and is hoping to scale to 5 times that by 2025) there’s simply no changing course now.

Silicon Valley can’t engineer its way out of this problem. They’re going to have to MINE their way out of it. That’s why I believe we’re at the beginning of an unprecedented lithium boom — and why my publication Foundational Profits is following a $2 lithium miner that has the only mining-ready permitted project in North America.