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.
4. Alcoa Corporation (NYSE:AA)
Number of Hedge Fund Holders: 35
Alcoa Corporation (NYSE:AA) is a leader in bauxite and alumina (aluminum oxide) production. It is pushing green tech with a focus on low-carbon production.
The company’s roadmap features innovations like ASTRAEA, which purifies recycled aluminum scrap, and the “Refinery of the Future” project, aiming for zero-emission alumina refining. For 2024, Alcoa Corporation (NYSE:AA) anticipates alumina production of 9.8 – 10 million metric tons and expects to ship 12.7 – 12.9 million metric tons.
Alcoa Corporation (NYSE:AA) reported its financial results for the first quarter of 2024, revealing an adjusted EBITDA of $132 million, up slightly from $89 million reported last quarter. The company also made significant progress on its strategic initiatives, including the acquisition of Alumina Limited.
Analysts have a positive outlook for the company’s future, setting an average 12-month price target of $39.21, with estimates ranging from $31 to $50. This suggests a potential increase of over 4% from the current price levels.
Of the 919 hedge funds tracked by Insider Monkey at the end of Q1 2024, Alcoa Corporation (NYSE:AA) was held by 35 hedge funds, making it one of the best rare earth stocks to buy now.
3. Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Holders: 39
Albemarle Corporation (NYSE:ALB) is a prominent player in the global specialty chemicals industry, focusing on three key areas: energy storage, specialties, and specialists.
Albemarle Corporation (NYSE:ALB) recently shared progress on the Kings Mountain Mine project, a significant lithium deposit in the US. The company’s plan includes the mine design, key features, and lithium extraction methods. If approved for investment, the mine is projected to produce approximately 420,000 tons of lithium concentrate annually. This lithium will be essential for electric vehicles, renewable energy storage, and national defense applications.
During the company’s Q1 2024 earnings call, it was reported that adjusted EBITDA remained strong at $291 million. Albemarle Corporation (NYSE:ALB) also highlighted its focus on cost control, delivering over $90 million in productivity savings in Q1 and remaining on track for its $280 million target for 2024.
Analysts are optimistic about the Albemarle Corporation (NYSE:ALB) stock, with an average 12-month price target of $147.81. This represents an over 49% upside potential from the current price of $99. The price targets range from a high of $188 to a low of $122. Based on ratings from 16 analysts, the stock is considered a “Moderate Buy,” reflecting positive analyst sentiment.
Here’s what The London Company said about Albemarle Corporation (NYSE:ALB) in its Q4 2023 investor letter:
“Albemarle Corporation (NYSE:ALB) – ALB underperformed as weak lithium prices drove downward revisions to earnings expectations, and sentiment became more negative regarding demand for electric vehicles. Commodity prices are inherently uncertain, but we continue to view ALB-as a winner in this growing industry and favorably positioned on the cost curve. Our long- term view of ALB is not affected by short-term supply- demand dynamics for the commodity.”
Albemarle Corporation (NYSE:ALB) ranks third on our list of the best rare earth stocks and ETFs.
2. Teck Resources Limited (NYSE:TECK)
Number of Hedge Fund Holders: 60
Teck Resources Limited (NYSE:TECK), a Canadian diversified mining company founded in 1913, engages in the exploration and production of natural resources across continents.
The company primarily focuses on steelmaking coal, copper, zinc, and energy. In addition to its main commodities, Teck Resources Limited (NYSE:TECK) also produces lead, silver, molybdenum, and various other metals, chemicals, and fertilizers. The company is also involved in gold exploration.
Teck Resources Limited (NYSE:TECK)’s Q1 2024 earnings call revealed that the adjusted EBITDA came in at $1.7 billion, driven by strong steelmaking coal and copper prices. Copper sales volumes increased, and steelmaking coal prices remained high compared to the same period last year. Revenue reached $3.98 billion, up 5.36% from Q1 2023.
Analysts have a positive outlook for Teck Resources Limited (NYSE:TECK), with an average 12-month price target of $57.3. This represents a potential upside of over 20% from the current price levels. Price forecasts range from a low of $51.63 to a high of $66.9. Furthermore, 11 out of 12 analysts have rated the stock as a “Buy.”
Here’s what Greenlight Capital said about Teck Resources Limited (NYSE:TECK) in its Q1 2024 investor letter:
“Finally, we established a medium-sized macro position to benefit from higher copper prices. Long-time partners may recall that in 2021 we presented Teck Resources Limited (NYSE:TECK) at the Sohn Investment Conference. At the time, our thesis was based on a combination of being bullish on copper and believing that TECK was about to exit the penalty box after a multi-year investment in a new copper mine that was on the brink of finally coming online. Back then, TECK traded at C$31.09. Based on copper at $4.50 a pound, we thought the stock was undervalued by half. It has since doubled (and dramatically outperformed copper peer Freeport-McMoRan) and, over time, we have reduced the position into strength.
As we showed on this slide from our 2021 presentation, our thesis was that after several new mines, including TECK’s, there would not be new supply available in the second half of this decade.
Time has passed, the new mines have come online and the anticipated gap between supply and demand is likely to open up in the next year. While we still believe TECK is undervalued should copper prices rise, it is less undervalued than it once was. Our thesis now is that copper supply is about to fall short of demand, forcing prices substantially higher. Once again, we think the best way to invest in that thesis is the most direct way – in this case through options on copper futures.”
1. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Holders: 86
Freeport-McMoRan Inc. (NYSE:FCX) is a major mining company that digs for valuable minerals across three continents: North America, South America, and Indonesia. Established in 1987 and headquartered in Phoenix, Arizona, the company primarily focuses on copper, gold, and molybdenum, while also exploring other metals. Freeport-McMoRan Inc. (NYSE:FCX) ranks first on our list of the best rare earth stocks and ETFs.
Freeport-McMoRan Inc. (NYSE:FCX) is currently developing a geothermal heating system for its copper mines in Arizona. This sustainable heat source will improve copper recovery from previously mined materials. The project also includes improvements to the electrical grid for better reliability. The project has a total cost of $175 million and is expected to take 5-7 years to complete.
Freeport-McMoRan Inc. (NYSE:FCX) reported a strong Q1 2024 with adjusted EBITDA of $2.5 billion and operating cash flow of $1.9 billion. This positive performance was driven by a favorable copper price, averaging $3.94 per pound. The company highlighted efficient operations in the U.S. despite lower ore grades, while South American and Indonesian mines exceeded expectations. Capital expenditures were $800 million, excluding a $500 million investment in their Indonesian smelter project, which is on track for a June 2024 start.
Wall Street analysts are bullish on Freeport-McMoRan (NYSE:FCX), with an average price target of $53.86. This represents a potential increase of over 12% from the current price levels. Analysts’ predictions range from a high of $60 to a low of $46 per share. The majority of the analysts (8 out of 14) have given the stock a “Buy” rating.
While we acknowledge the potential of Freeport-McMoRan (NYSE:FCX) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AVB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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