In this article, we will take a look at the 14 best rare earth stocks and ETFs. To see more such companies, go directly to 5 Best Rare Earth Stocks and ETFs.
Rare earth metals industry sees a lot of volatility since commodity prices are subject to move rapidly on the back of supply and demand fluctuations and geopolitical dynamics. Part of the reason behind this huge volatility is China’s dominance in the market. A report from NetworkNewsWire Editorial Coverage said that about 90% of all permanent magnets are products in China. The country is currently mulling banning the exports of these metals to increase domestic demand. According to a report by S&P Global, Neodymium iron boron (NdFeB) magnets accounted for about 90% of permanent magnets in 2018. About 90% of these were produced in China. China’s dominance in the industry has long troubled the US car and energy companies. Trade wars between the US and China have also dented the market dynamics.
But the industry has also seen some organic growth catalysts over the past few months and years. For example, the rapid rise of electric vehicles created a huge opportunity for rare earth metals companies. Some of these companies include Ucore Rare Metals Inc., MP Materials Corp. (NYSE: MP), Neo Performance Materials Inc. (TSX: NEO), Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) and Li-Cycle Holdings Corp. (NYSE:LICY).
The NetworkNewsWire Editorial Coverage report said that China’s plans to squeeze international exports of rare earth metals is the result of the country’s pledge in 2020 that it would start cutting carbon emissions after hitting the peak in 2030. Currently China wants to boost the use of rare earth metals in domestic production. But the report said that this phenomenon could bode well for the industry in the long run since companies in North America would start building their rare earth metals capabilities. The report said that the supply crunch is causing companies to innovate in the sector. The rare earth minerals market is expected to grow about 12.3% annually to $9.6 billion by 2026. The report in this regard highlighted several companies that are in a position to take advantage of the potential boom in the market. One of these companies is Ucore Rare Metals. Here’s what the report said about the company:
“For more than 15 years, Ucore Rare Metals Inc. (TSX.V: UCU) (OTCQX: UURAF) has bbeen an important part of the rare earth market, developing technology to disrupt the status quo of rare earth elements. The company is now in aposition to help solve the impending supply crisis by assisting with the creation of an independent supply chain of rare earth oxides for NorthAmerican manufacturers. Ucore has differentiated itself with a unique approach that focuses on the most profitable sector of the supply chain, processing material and avoids the risks of large CAPEX requirements. Ucore is fast approaching a launch point as it commissions a commercial demonstration plant in Canada that uses RapidSX(TM) (SX is short for “solventextraction”), a proprietary metals separation technology wholly owned by Ucore that is not merely an alternative to Chinese technology but is also potentially better than anything in use today.”
Photo by Francisco Fernandes on Unsplash
Our Methodology
For this article we first listed all the holdings of VanEck Rare Earth/Strategic Metals ETF (REMX). We then gauged hedge fund sentiment for each of these holdings and picked the stocks with the highest number of hedge fund investors. We gauged hedge fund sentiment for the stocks using Insider Monkey’s database of 910 hedge funds.
But before mentioning the best rare earth stocks, we talk about top three rare earth ETFs.
Best Rare Earth Stocks and ETFs
14. VanEck Rare Earth/Strategic Metals ETF (REMX®)
VanEck Rare Earth/Strategic Metals ETF (REMX®) replicates the performance of the MVIS®Global Rare Earth/Strategic Metals Index (MVREMXTR). VanEck Rare Earth/Strategic Metals ETF (REMX®) gives exposure to companies involved in producing, refining, and recycling of rare earth and strategic metals and minerals.
13. iShares MSCI Global Metals & Mining Producers ETF (BATS:PICK)
iShares MSCI Global Metals & Mining Producers ETF (BATS:PICK) tracks the performance of an index tracking companies primarily engaged in mining, extraction or production of diversified metals, excluding gold and silver. Among the top holdings of the fund include BHP, Rio Tinto and Glencore.
12. Horizons Global Uranium Index ETF (TSE:HURA)
Horizons Global Uranium Index ETF (TSE:HURA) is up about 33% over the past one year. Horizons Global Uranium Index ETF (TSE:HURA) gives exposure to companies involved in uranium mining and exploration industry.
11. Sibanye Stillwater Limited (NYSE:SBSW)
Number of Hedge Fund Holders: 19
Metals and mining company Sibanye Stillwater Limited (NYSE:SBSW) ranks 11th in our list of the best rare earth stocks to buy now. As of the end of the second quarter of 2023, 19 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Sibanye Stillwater Limited (NYSE:SBSW). The biggest hedge fund stakeholder of Sibanye Stillwater Limited (NYSE:SBSW) during this period was Ryan Schedler and Bradley Shisler’s Condire Investors which owns a stake worth about $24 million.
Here is what Desert Lion Capital has to say about Sibanye Stillwater Limited (NYSE:SBSW) in its Q2 2022 investor letter:
“Sibanye Stillwater is one of the largest PGM (platinum group metal) producers in the world with major operations in South Africa and the U.S. On top of its additional gold mining operations in SA, the business has significant upside optionality in its growing lithium and nickel operations which are not yet contributing to earnings and remain unrecognized by the market in SSW’s price.
PGM and gold prices are lower than a year ago and Sibanye Stillwater’s earnings followed suit. Gold operations made a loss during the period due to a wage negotiation labor strike (see chart on next page). Notwithstanding all these headwinds, the company reported H1 2022 earnings per share of R4.23 which was in line with the six months ended December 2021 EPS…” (Click here to see the full text)
10. Tronox Holdings plc (NYSE:TROX)
Number of Hedge Fund Holders: 21
Tronox Holdings plc (NYSE:TROX) operates titanium-bearing mineral sand mines, makes TiO2 pigment; ultrafine specialty TiO2, among other materials. In August, Credit Suisse upgraded Tronox Holdings plc (NYSE:TROX) to Neutral from Underperform, citing improved valuation.
“Recent results have been under pressure due to significant inventory destocking by customers that has resulted in a sharp decline in estimates during 2023. Many of these issues are likely to be transit and unlikely to repeat next year,” Credit Suisse’s John Roberts said in a note.
As of the end of the second quarter of 2023, 21 hedge funds out of the 910 funds tracked by Insider Monkey reported owning stakes in Tronox Holdings plc (NYSE:TROX). The biggest stakeholder of Tronox Holdings plc (NYSE:TROX) during this period was Jonathan Barrett and Paul Segal’s Luminus Management which owns a $35.4 million stake in the company.
9. Sociedad Química y Minera de Chile S.A. (NYSE:SQM)
Number of Hedge Fund Holders: 24
Sociedad Química y Minera de Chile S.A. (NYSE:SQM) shares have lost about 43% over the past one year. Recently, Citi started covering Sociedad Química y Minera de Chile S.A. (NYSE:SQM) with a Buy/High Risk rating and an $85 price target price.
As of the end of the second quarter of 2023, 24 hedge funds out of the 910 funds tracked by Insider Monkey reported owning stakes in Sociedad Química y Minera de Chile S.A. (NYSE:SQM). The biggest stakeholder of Sociedad Química y Minera de Chile S.A. (NYSE:SQM) during this period was Ken Griffin’s Citadel Investment Group which owns an $118.2 million stake in the company.
In its latest earnings call Sociedad Química y Minera de Chile S.A. (NYSE:SQM)’s management talked about the company’s EV expansion and future plans:
“We continue to see strong fundamentals behind lithium demand growth with the global EV sales showing another strong performance during the second quarter, increasing 50% year-over-year. We believe that the total EV sales growth could be close to 30% this year when compared to 2022. And the global lithium demand could increase at least 20% this year compared to the previous year. Signing the long-term agreement with Ford Motor Company and LG Energy Solution was another important milestone of the quarter.
The trust our customers put in Sociedad Química y Minera de Chile S.A. (NYSE:SQM)’s ability to successfully increase production in a sustainable way and deliver high-quality battery material make us very proud and encourage us to continue with our growth plans in Chile and globally. We expect to produce approximately between 180,000 and 190,000 metric tons of lithium this year from our operations in Chile and China.”
You can read the complete earnings call transcript here.
8. Southern Copper Corporation (NYSE:SCCO)
Number of Hedge Fund Holders: 25
As of the end of the second quarter of 2023, 25 hedge funds out of the 910 funds tracked by Insider Monkey were long Southern Copper Corporation (NYSE:SCCO). The biggest stakeholder of Southern Copper Corporation (NYSE:SCCO) during this period was Steve Cohen’s Point72 Asset Management which owns a $159 million stake in the company.
7. Constellium SE (NYSE:CSTM)
Number of Hedge Fund Holders: 27
Constellium SE (NYSE:CSTM) is primarily an aluminum products company. In July Constellium SE (NYSE:CSTM) posted second quarter results. Second quarter GAAP EPS came in at €0.21. Revenue in the quarter fell 14% on a YoY basis.
As of the end of the second quarter of 2023, 27 hedge funds out of the 910 funds tracked by Insider Monkey held stakes in Constellium SE (NYSE:CSTM). The biggest stakeholder of Constellium SE (NYSE:CSTM) during this period was Jared Nussbaum’s Nut Tree Capital which owns a $69 million stake in the company.
6. MP Materials Corp. (NYSE:MP)
Number of Hedge Fund Holders: 27
Rare earth metals company MP Materials Corp. (NYSE:MP) ranks 6th in our list of the best rare earth stocks to buy according to hedge funds.
Out of the 910 hedge funds in Insider Monkey’s database of hedge funds, 27 funds held stakes in MP Materials Corp. (NYSE:MP). The biggest stakeholder of MP Materials Corp. (NYSE:MP) during this period was Daniel Gold’s QVT Financial which owns a $185 million stake in the company.
Bernzott Capital Advisors made the following comment about MP Materials Corp. (NYSE:MP) in its second quarter 2023 investor letter:
“Materials detracted from relative returns. MP Materials Corp. (NYSE:MP), a miner of rare earth minerals, fell -18.8% as weak ore prices weighed on its stock price. The long-term outlook is bright as the EV supply chain continues to expand and the company figures prominently as a domestic source of a required resource.”
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Disclosure: None. 14 Best Rare Earth Stocks and ETFs is originally published on Insider Monkey.