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Batteries Are The Future.Again

|About: Aqua Metals (AQMS), ITKG, JCI, ULBI, Includes: AXPW
Summary

Battery Market is Heating Up

Market Demands Power Storage Solutions

There are Small Cap Stocks in the Battery Space

Batteries Are the Future – Again.

Exciting things are happening in battery technology, with new breakthroughs occurring to allow batteries to hold more power, charge faster, be made cheaper, get smaller, and not overheat.  There will be multiple winners deep within the battery supply chain, and this article sheds some light on some of the less well-known companies that may benefit from developments in this space.

Lithium Ion batteries are approximately one-third the weight of lead-acid batteries, and can store twice as much energy per unit of volume than nickel-cadmium batteries, making them ideal for small-scale applications in computers, electronics, and cell phones.

A company to watch in this space is Ultralife Corporation (NASDAQ:ULBI), a maker of power systems made from lithium based batteries that has major US defense contracts.  While their revenue has not gone up much (+9%) from their last 4 quarters as of July 2nd, 2017 of $83.2M vs. FY 2015 when it was $76.4M, their Net Income has increased +96% in that same period.  In April 2017, they announced the launch of their next-gen thin Cell lithium manganese dioxide (Li-MnO2) pouch-cell batteries, ideal for use in internet-connected and wearable devices. 

The Company has a significant business, and is increasing its profitability.  It will be interesting to see if they can return to revenue growth.

Lead Acid batteries are the oldest type of rechargeable battery, and represent approximately 40% of the battery market. 

A company focused on this battery sector, and poised for a comeback is Aqua Metals (NASDAQ:AQMS).  The stock has dropped from a high of $21.89 in middle of March 2017, to $7.16 as of early September 2017 on concerns that their losses were widening.  The company has a patent-pending lead-recycling technology that is non-polluting, and has the potential to produce more useable lead for the battery makers in an eco-friendly way.  The company built its first recycling facility in Nevada’s Tahoe-Reno Industrial Center last year and produced its first revenues last quarter. 

The next several quarters will be very telling in terms of their ability to execute on their new strategic partnership with Johnson Controls (NYSE:JCI), which was announced in February 2017.  JCI will become the first licensee for the aqua-refining process and will supply Aqua Metals with batteries to recycle. It will be interesting to see what the Company’s guidance will be how many quarters to achieve profitability.

Bipolar plate battery technologies offer a significant reduction in size and weight of lead-acid batteries through the elimination of up to 50% of the inert lead grids.  For more information on major developments in this sector, take a look at the July 25th, 2017 Edition of Batteries International Magazine - Batteries International magazine - 104 issue.

A small company that is mentioned several times in the magazine (starting on page 23) that is at the forefront of this technology is Integrated Technologies, Inc. (OTC:OTCPK:ITKG), which has developed ElectriPlast, an electrically and thermally conductive resin-based material that is being incorporated into new electric vehicles.  ITKG recently announced that it has developed one of the most advanced bi-polar plates for lead acid batteries, and is working with several larger battery makers to bring this technology to market.

The interest in their bi-polar battery design comes from its ability to simplify the assembly process, create additional power density, allow a greater design flexibility, removing corrosion, and reducing weight.  This technology could enable lead acid batteries to compete with other (lithium, etc.) battery chemistries that seem to be gaining momentum.

The Company has begun to prove itself as a new materials leader for the electric vehicle space, announcing in June 2017 that its ElectriPlast materials were chosen by a leading European electric luxury SUV maker for use in a high voltage connector, and by a separate major US auto manufacturer for an automotive optical sensing system (which will go into 2 million vehicles in 2018). 

Because of the low market cap of only $6M, investors buying stock in ITKG are essentially buying a call option on whether there will be any announcements in the battery business.

Disclosure: I am/we are long ULBI, ITKG.