In this article, we are going to discuss the 8 best rare earth stocks and ETFs. You can also check out the 10 Largest Rare Earth Companies in the World here.
Rare earth elements (REEs), which refers to 17 metals that are similar chemically, are surprisingly abundant in Earth’s crust. However, their dispersion and geochemical properties make them difficult and expensive to extract, leading to them being called “rare.”
REEs are important for a vast range of technologies, earning them the nickname “vitamins of modern industry.” Apart from being irreplaceable for clean energy and consumer electronics production, REEs are also strategic for defense and aerospace engineering, the production of aircraft, missiles, satellites, and communication systems.
Hence, it is no wonder that the global rare earth metals market is valued at an estimated $5.65 billion in 2024. Analysts project this market to experience steady growth, reaching $8.63 billion by 2031. This is equivalent to a compound annual growth rate (CAGR) of 6.2% over this period, indicating a promising future for the industry.
China has been dominating the rare earth metals market for decades producing a staggering 240,000 metric tons last year, over five times more than its closest competitor, the United States, according to US Geological Survey data. China further maintains its control by processing around 90% of the world’s rare earths into permanent magnets used in various technologies. In 2022, China accounted for 70% of global production of REEs. This dominance stems from a combination of factors, including historical geological exploration efforts, favorable mining conditions, and government support for the industry.
Brazil, along with other Western countries, is currently working towards breaking China’s dominance of this industry. Brazil has advantages like low labor costs, clean energy, and established regulations. However, challenges include low rare earth prices which have gone down 70%, technical difficulties, and getting funding. Despite these challenges, Brazil is making progress with its first mine in operation and increased government support for the industry. To jumpstart its rare earth industry, the Brazilian government allocated 1 billion reais ($194.53 million) in February to fund strategic mineral projects.
Other countries are also working towards diversifying the supply chain. In recent years, the United States has sought to mitigate risks related to the REEs’ supply chain. This includes restarting domestic mining operations, like the Mountain Pass site in California, and building processing facilities to avoid reliance on China. This objective of supply chain diversification has also led the US to secure deals with Vietnam on minerals and semiconductors.
Similar to the United States, the European Union (EU) is also actively promoting domestic extraction projects in countries such as Sweden, Finland, Spain, and Serbia. This is part of the EU’s efforts to enhance its self-sufficiency in critical minerals, including rare earth elements.
Our Methodology
To shortlist the best rare earth stocks, we relied on Insider Monkey’s database of 919 hedge funds as of Q1 2024 to analyze the hedge fund sentiment for each stock. We picked the rare earth stocks with the highest number of hedge fund investors. Furthermore, we included two of the best rare earth ETFs, chosen for their impressive 3-year returns. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Best Rare Earth Stocks and ETFs
8. SPDR S&P North American Natural Resources ETF (NYSE:NANR)
3-Year Return: 13.27%
Assets Under Management: $533.88 Million
The SPDR S&P North American Natural Resources ETF (NYSEArca:NANR) is an investment vehicle that offers exposure to companies operating in the natural resources sector. This ETF focuses on industries such as energy, metals, mining, and agriculture.
The ETF’s total assets under management exceed $533 million, with a gross expense ratio of 0.35%. As of May 31, 2024, the fund’s NAV return stands at 12.09% year-to-date, slightly behind S&P 500 Index’s YTD returns of 14.75%.
The fund’s top 10 holdings are diversified across various sectors including materials, energy, and consumer stables through investment in companies like Freeport-McMoRan Inc. (NYSE:FCX), Newmont Corporation (NYSE:NEM), Exxon Mobil Corporation (NYSE:XOM), and Chevron Corporation (NYSE:CVX).
The SPDR S&P North American Natural Resources ETF (NYSEArca:NANR) has an estimated 3-5-year EPS growth rate of 9.84% and a distribution yield of 2.26%, making it one of the best rare earth ETFs.
7. Global X Uranium ETF (NYSE:URA)
3-Year Return: 17.82%
Assets Under Management: $3.42 billion
The Global X Uranium ETF (NYSEArca:URA) offers exposure to a basket of companies involved in uranium mining and nuclear component production. This includes businesses involved in extraction, exploration, and manufacturing equipment for the nuclear and uranium sectors.
The ETF has an expense ratio of 0.69% and currently holds assets worth $3.42 billion. The fund’s net asset value has experienced growth of over 50% over the past year. The Global X Uranium ETF (NYSE:URA) has a return on equity of 5.60% and its holdings boast a weighted average market cap of $13.28 billion.
The top holdings are spread across various industries including energy, materials, and industrials, with the other metals/minerals sector holding the highest weightage at 70.1%. This is followed by the Engineering & Construction sector at 8.9%. Cameco Corporation (NYSE:CCJ) is the most significant stock holding of the ETF, with a weightage of almost 25%.
In terms of region, The Global X Uranium ETF (NYSEArca:URA) has the greatest exposure to Canada at 47.5%, followed by Australia at 17.6%, and South Korea at 11.7%.
6. MP Materials Corp. (NYSE:MP)
Number of Hedge Fund Holders: 26
MP Materials Corp. (NYSE:MP) is a leading producer of rare earth materials critical for electric vehicles and other clean technologies. The company has a market capitalization of around $2.3 billion.
Recently, MP Materials Corp. (NYSE:MP) secured a $58.5 million grant to build the US’s first fully integrated rare earth magnet facility, which shows their commitment to domestic supply chain resilience.
MP Materials Corp. (NYSE:MP)’s results for the first quarter of 2024 showed that the company achieved a record-breaking production volume, up 4% year-over-year. It also launched production of new separated products, including neodymium-praseodymium (NdPr). MP Materials Corp. (NYSE:MP)’s strong balance sheet and progress in expanding its offerings positions the company well for future growth, even in this challenging market.
Analysts continue to see upside potential in MP Materials Corp. (NYSE:MP). Investment firm, D.A. Davidson, reaffirmed its Buy rating and raised the price target on MP Materials Corp. (NYSE:MP) to $24 per share. This sentiment is echoed by Benchmark analysts, who have also maintained a Buy rating on the stock. The average price target of $25 reflects an upside potential of over 150% from the current price levels.
As of Q1 2024, 26 hedge funds reported owning a stake in MP Materials Corp. (NYSE:MP).
5. Constellium SE (NYSE:CSTM)
Number of Hedge Fund Holders: 27
Constellium SE (NYSE:CSTM) is a global leader in aluminum, designing, manufacturing, and selling rolled and extruded aluminum products. The company operates through three main divisions namely packaging and auto-rolled products, aerospace & transportation, and automotive structures and industry.
Constellium SE (NYSE:CSTM) recently announced that it is partnering with French recycling companies on a new green initiative called “Close the Loop.” Funded in part by the French government’s sustainability program, this project aims to develop methods for efficiently recycling aluminum from old cars back into new ones.
Constellium SE (NYSE:CSTM)’s Q1 2024 results saw an adjusted EBITDA of €137 million, even after considering the impact of the metal price lag. This positive performance was driven by Constellium SE’s (NYSE:CSTM) strong Aerospace & Transportation segment (€80 million adjusted EBITDA).
The company remains cautiously optimistic about the future, maintaining its 2024 guidance for adjusted EBITDA (excluding metal price lag) in the €740 million to €770 million range.
Analysts are mostly bullish on Constellium SE (NYSE:CSTM). In a recent report, Benchmark reiterated a “Buy” rating and set a $24 price target for the stock. This echoes the broader analyst sentiment, with a consensus “Buy” rating and a $25.4 price target based on ratings from six analysts.
