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The future looks clean and green, at least in terms of investing. While not every company may be in support of the energy transition to renewable products, many massive companies, governments, and institutions certainly are. And that means there are massive opportunities for Tax-Free Savings Account (TFSA) investors.
However, not every renewable product out there is a winner. That’s why TFSA investors need to be careful, and it’s why today I’m going to go over one strong stock to buy in 2023, and one to avoid.
Avoid: uranium
Hear me out. Uranium products are a strong choice for the next decade – there’s no denying that. The world needs renewable, clean power right now. Uranium provides this by powering reactors around the world, but even more are being built! In fact, about 20% of the United States of America is already powered by nuclear power.
Yet, there is a fly in the ointment here. That fly is the uranium itself. Uranium is already being driven up in price because it’s pretty difficult to find. And mining for it is creating even more environmental problems, but that’s for another story.
The main focus for TFSA investors here is that if you’re wanting to invest in clean energy that lasts, you need to invest in renewable energy. If not, we’re facing the same problem in the future that we are right now. Uranium is a finite resource that will have to be continually mined if we hope to use it. And already companies are worried that they’ll run out of uranium reserves fairly quickly.
With all this in mind, I would avoid Cameco (TSX:CCO) if you’re looking for a stock to set and forget. Cameco stock is the world’s largest publicly traded uranium producer. It’s certainly going to do well in the next few years. And if you have a price that you’re willing to wait for and then sell at, sure it could be great. But if you want a company to set and forget for decades, I’d avoid this for sure.
Buy: lithium
Then, there’s lithium products. Now, it is absolutely true that lithium must also be mined. This is definitely an issue that TFSA investors should be aware of. However, lithium can also be recycled! You know that box in your office where you’re supposed to dump lithium batteries? Use it! Because lithium can be used again and again, supporting your investment into the product.
Speaking of batteries, this is another reason you want to get into lithium. Uranium powers just one type of power. Yet, lithium powers practically every kind of power. The batteries from phones to solar panels need the product, so no matter what type of renewable energy we have in the future, you can be sure lithium will have a hand in it.
With this in mind, I would seriously consider Lithium Americas (TSX:LAC) as a strong long-term investment. The company is coming off a win in courts to mine its Thacker Pass location in Nevada. It continues to expand through mergers, acquisitions, and more. Plus, right now it’s a great deal. After some poor earnings, shares are still down by about 12% in the last year, though up 10% in the last month alone.
Bottom line
If you’re seeking long-term investments, TFSA investors should definitely look to clean energy. But be aware that not all clean energy projects are built the same. With that in mind, during this downturn with plenty of deals on hand, I would definitely avoid uranium, and consider lithium stocks instead.
