Rare earth stocks seem like a no-brainer. If you take the whole idea of supply and demand, the inherent scarcity in rare earths would imply that the companies in charge of these elements would be great investments right now.
Unfortunately, buying rare earth stocks isn’t that simple. Investors need to understand the risks of this highly lucrative industry before considering dipping into rare earths.
First, let’s look at the biggest players. Molycorp, Inc. (NYSE: MCP) is one of the most popular because its $3 billion market cap and 5 million shares traded daily make it relatively stable. Molycorp operates mines primarily in California.
Smaller rare earth investments include Avalon Rare Metals (AMEX:AVL), which mines Thor Lake in Canada, and Rare Element Resources (AMEX:REE), which operates in both Canada and the U.S. Both rare earth stocks are worth around $300 million each, and both do upward of 1 million shares per day in stock volume.
Another rare earth stock would be OTC-traded Lynas Corp. (PINK:LYSDY), but despite its $2 billion market cap, investors should be wary of the mere 250,000 shares traded daily, as well as the fees and risks associated with trading a pink sheet stock like this. Lynas is headquartered in Australia and has operations in Malaysia.
So which, if any, of these stocks is worth a look?