A rare earths exchange traded fund could see trading volume ramp up this week after Molycorp (NYSE: MCP) reports quarterly results following Tuesday’s closing bell.
Molycorp is the third-largest holding in Market Vectors Rare Earth/Strategic Metals ETF (NYSEArca: REMX) at nearly 7% of the portfolio. The Van Eck ETF has about $500 million in assets and levies a net expense ratio of 0.57%.
The fund is up nearly 13% so far this year as prices of rare earth materials have risen.
Molycorp is the biggest rare earth mining company based in the U.S. Some analysts are bullish on the stock because of quota restrictions imposed by China, high demand and supply constraints.
“Such difference in supply and demand is likely to push the prices further,” Beacon Equity Research said in a recent note. “However, rare earth mining companies are now exploring places other than China for mining rare earth. Molycorp stock has performed extremely well since its stock market debut.”
Wall Street is looking for earnings of 10 cents a share from Molycorp.
Market Vectors Rare Earth/Strategic Metals is the only ETF of its kind.
“Given its extremely narrow focus, we feel that this thematic fund should be treated as a satellite specialty holding to complement a diversified portfolio,” says Morningstar analyst Abraham Bailin in a recent profile of the ETF.
“Motivations for investors holding this fund may include beliefs that production of high-tech items that require these metals, like jet engines, hybrid cars, wind turbines, flat-panel TVs, and smartphones, will increase or that China will restrict the export of their domestically mined rare earth and strategic metals going forward,” the analyst wrote.
