What happened

Lithium Americas (NYSE:LAC) stock dropped 15.6% in October, according to data from S&P Global Market Intelligence. For context, the S&P 500 (including dividends) fell 2.7% last month.

In 2020, shares of the Canada-based junior lithium mining company -- which isn't yet in the commercial production stage -- are up 207% through Monday, Nov. 2. The broader market has returned 4% over this period. 

Two lithium-ion battery packs laying on a flat surface.

Image source: Getty Images.

So what

Lithium Americas didn't release any bad news that would account for its stock falling in October. Rather, we can attribute the stock's steady drifting downward throughout last month to a pullback, a common phenomenon after a stock runs up rapidly. And, indeed, Lithium Americas stock did just that in September, when it gained 44.2%. With sizable quick gains like this, some investors -- or at least short-term traders -- will often take some profits.

This raises the question: Why did the stock soar in September? You can read my detailed explanation here, but the brief reason is that Lithium Americas stock was a beneficiary of investors pouring money into the broad lithium space. This monetary inflow was probably largely driven by the growing awareness that the electric vehicle (EV) revolution is well underway -- and lithium is needed to make lithium-ion batteries for EVs. 

Now what

Lithium Americas stock remains speculative since the company isn't yet mining any lithium for commercial sale. So, only investors who are quite risk-tolerant should consider buying it.

There are other less risky options in the lithium mining space, notably Livent, Albemarle, and Sociedad Quimica y Minera (known as SQM). U.S.-based Livent is a pure play on lithium, while Albemarle, also headquartered in this country, and Chile-based SQM also produce other products.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.