kool99/iStock via Getty Images

kool99/iStock via Getty Images

The Amplify Lithium & Battery Technology ETF (NYSEARCA:BATT ) invests in companies involved in the development, production, and use of lithium-based battery technology. These include the areas of battery storage solutions, battery metals & materials, and EVs. With EVs accounting for roughly 10% of new vehicle sales this year - and growing exponentially from next to nothing 10-years ago - the investment thesis here is pretty straight-forward. Today, I'll take a closer look at the BATT ETF to see if it might be a good choice to charge-up your portfolio in 2022.

As most all of you surely know, the global plug-in market has grown dramatically over the last decade:

Global BEV sales are expected to close out 2021 at 6.4 million units or +98% yoy. This year, the global market saw more and better choices, more affordable units, and broad policy support from governments around the planet as higher public awareness of global warming continues to be a significant tailwind. That being the case, I suspect the BEV space to continue to offer strong multi-year secular trends that will be provide lots of opportunities for astute investors.

As most all of you also surely know, all BEVs (battery-electric vehicle) must have a battery. And that brings us to the BATT ETF. I'll be taking a closer look at this ETF today to see how it has positioned its investors to benefit from the strong global tailwinds supporting the EV market and those companies that either supply the raw materials or do the actual manufacturing of electric batteries.

The top-10 holdings of the Amplify Lithium & Battery ETF are shown below and equate to a relatively un-concentrated 38.7% of the entire portfolio. That said, the top-3 holdings do have significant weightings:

In the #1 position with a 7.2% weight is Contemporary Amper (CATL), a company that has research, manufacturing and its headquarters located in China. According to the company's website, it was #1 in EV battery consumption volume last year. Just a week ago the NY Times published an article on Why A Chinese Company Dominates EV Batteries. That company, of course, was CATL - and it supplies batteries to many of the world's largest automakers - a list that includes General Motors (GM), Volkswagen (OTCPK:VLKAF), BMW (OTCPK:BMWYY), and Tesla (TSLA). The Times piece went on to report that CATL currently has 8 battery plants under construction and pointed out:

CATL's batteries require ready supplies of lithium and cobalt. Chinese firms have rushed to secure cobalt in places like the Democratic Republic of Congo, where huge deposits were once mined by an American company. This year, CATL acquired a quarter of the Kisanfu cobalt reserve, one of the world's richest, in Congo for $137.5 million.

BHP Group (BHP) is the #2 holding with a healthy 6.7% weight. Amazingly, metals and mining company BHP is down 7.5% (see graphic below) this year with most of the drop coming in August on a number of negative events: softening demand in China, slumping metals prices, and concerns about the company merging its oil & gas assets with Australian energy company Woodside.

Tesla is the #3 holding and is so well covered that I don't have much to add other than the fact that TSLA has a $1.07 trillion market cap and trades with a forward P/E = 177x.

The #4 holding with a 4.6% stake is battery & EV manufacturer BYD (OTCPK:BYDDY) - one of my favorite selections in the EV space. I've written much about BYD on Seeking Alpha, including the company's excellent global EV bus strategy (see BYD Continues Making Huge Progress In Electric Buses - And Passenger EVs Too) as a platform to grow EV sales. That said, while BYD buses are very popular, and despite the fact that BYD has a US manufacturing site in California that employs union labor, the Washington Post recently reported that BYD is banned from US funding via the Biden infrastructure plan. Still, shares of BYD are up nearly 38% this year.

The next two companies in the top-10 list are battery raw materials miners Glencore plc (OTCPK:GLNCY) and Norilsk Nickel (OTCPK:NILSY).

The #7 holding is another EV maker: Lucid (LCID). The Lucid Air was named MotorTrend's Car of the Year.

The fund closes out the top-10 with Korea-based battery and electronics companies Samsung & LG.

Overall, the BATT portfolio is heavily weighted in raw materials, metals & mining (32.7%) with EVs and EV components coming in second place with a 20.7% weight:

The price performance of the BATT ETF against direct competitor Global X Lithium & Battery Tech ETF (LIT) is shown below:

Not only did LIT outperform BATT by ~23% over the past year, BATT lagged the S&P500 as measured by the (SPY) ETF by ~10 percentage points.

Over three years, the performance comparison is even worse:

Obviously one of the risks of the BATT ETF is the portfolio's heavy weighting toward metals and mining - a sector that is typically rife with international intrigue and foreign government involvement and/or intervention. It is also a sector that depends on a growing global economy and is exposed to the cyclical risks thereof.

In addition, the BATT portfolio is also highly exposed to China:

While that certainly makes sense from a "go to where the action is" perspective, the fate of Chinese companies in the hands of an arguably over-involved government is very much in doubt in my opinion. Meantime, the still simmering trade war between the US and China could have negative repercussions - for both countries - and this ETF.

Meantime, the Biden administration's BBB plan - which includes project funding for excellent infrastructure projects like building a nationwide EV-charging network and for building-out an electrical transmission grid needed to support renewable clean-tech energy and EVs - remains in limbo as the republican party is united against it while the coal, oil & gas lobbyists are certainly getting their money's worth from Senator Manchin - a Democrat - who has been opposed to the BBB plan from the very beginning.

Bottom line here: I like the EV space but I don't like the BATT ETF. It has an uninspiring performance track record despite holding companies that - at least from a glance - should be doing well. However, BHP's performance this year has been quite dreary, and the big weighting in metals & miners took a hit earlier in the year due to a slow-down in demand from China. That said, the commodity miners could very well bounce-back next year. In that case, the BATT fund could be an outperforming asset.

However, I continue to advise my followers and investors to stick with the iShares Self-Driving EV & Tech ETF (IDRV) in this space. IDRV has out-performed the S&P500 over the past three years and is full of the semiconductors companies whose futures are - in my opinion - much brighter as compared to the metals and miners. Consider reading my recent Seeking Alpha coverage of the IDRV ETF (Why IDRV Will Continue To Outperform The ARKQ ETF). Note the IDRV ETF has an expense fee 12 basis points below that of the BATT ETF (0.47% compared to 0.59%).

I'll end with a 3-year chart comparing BATT, IDRV, and the SPY S&P500 returns:

This article was written by

Disclosure: I/we have a beneficial long position in the shares of SPY, IDRV either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am an electronics engineer, not a CFA. The information and data presented in this article were obtained from company documents and/or sources believed to be reliable, but have not been independently verified. Therefore, the author cannot guarantee their accuracy. Please do your own research and contact a qualified investment advisor. I am not responsible for the investment decisions you make.