Stocks that benefit from EV demand aren't limited to car manufacturers. Here are three long-term materials picks

Explore long-term investment opportunities in the materials sector beyond car makers, leveraging the increasing demand for electric vehicles (EVs). As per the International Energy Agency's Global EV Outlook for 2023, the growth of EVs is astounding, with 14% of new car sales being electric in 2022, a significant increase from previous years. With projections estimating EVs to represent up to 18% of global car sales this year and 35% by 2030, it's crucial to consider the potential market impact and government policies.

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Should you anticipate the ongoing momentum towards EV adoption, focusing on stocks of copper miners presents a compelling investment strategy. Sam Peters, a portfolio manager at ClearBridge Investments, highlights the significance of copper in the EV industry. Each EV requires approximately 200 pounds of copper, while grid electrification for overnight charging significantly relies on copper. However, the supply of copper is limited compared to the substantial demand generated by EVs.

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One recommended option for investors is Freeport McMoRan Inc., which is widely regarded as a prime choice among copper bulls. Peters emphasizes that copper demand could grow by three to five million metric tons annually, but the existing supply base of 25 million metric tons cannot meet this surge. Remarkably, visible copper inventories remain historically low, indicating a persistent shortage despite China's partial economic shutdown in the previous year.

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Furthermore, Peters expresses optimism about the oil sector, particularly companies involved in offshore drilling and related services, as another potential long-term investment avenue.

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Supporting the case for copper, Jefferies analyst Christopher LaFemina predicts a steady increase in global copper demand, ranging from 1.9% to 3.7% annually from 2023 to 2030. In contrast, supply growth is projected to range from 0.7% to 2.7% annually. LaFemina's estimations reveal a 21% surge in demand from 2022 to 2030, compared to a mere 16% increase in supply. This points to a potential supply shortfall of 1.3 million tons in 2030.

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While copper's long-term prospects are promising, LaFemina sets aggressive 12-month price targets for three copper mining companies. He asserts that current share prices have factored in a copper price of $3.86 per pound, approximately the current level for front-month copper contracts. However, based on the companies' average forward price-to-earnings ratios over the past decade and a potential increase in copper prices to $4.75 per pound, he establishes price targets in local currencies for these mining stocks.

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In summary, with the EV revolution on the horizon, investors can seize opportunities beyond car manufacturers by considering copper mining stocks. By understanding the interplay between EV demand, limited copper supply, and promising price projections, investors can make informed decisions for long-term growth in their investment portfolios.

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