By Andrey Dashkov, analyst, Casey Research
Life-changing opportunities often come from the smallest markets or the tiniest stocks.
These opportunities are perfectly suited for the average investor, because they’re cheap enough to put your money in… they’re often overlooked by Wall Street… and they are so small that it could take just a little good news to send them soaring.
Take commodities, our bread and butter here at Casey Research. Most investors focus only on gold or silver, which offer plenty of strategies for building your wealth.
But there’s another set of metals that is almost completely overlooked. In 2021, the global market for this kind of commodity was worth just $2.8 billion.
For comparison, the global market for gold that same year was worth about $214 billion, more than 76 times higher.
But the small size of this overlooked metals market is exactly why I think it’s so exciting… because that means huge upside.
In fact, during the last bull market, some metals in this sector climbed by 1,000% or more.
And we’re seeing a similar opportunity today…
Who Dominates the Rare Earth Elements Market?
I’m talking about rare earth elements.
Rare earths are metals that have unique and valuable properties, like magnetism. They’re used in cutting-edge technologies that power everything from your smartphone to military aircraft.
In fact, rare earths are most often used in the manufacturing of military technology. For example, an F-35 fighter jet contains about 920 pounds of rare earths. A Virginia-class submarine contains more than 9,000 pounds of these elements.
So rare earths are critical because of their high-performance uses – and for our national security. But this market is still relatively obscure.
And this sector is almost entirely dominated by China-based producers. The country supplies 80% of the U.S.’s rare earths. Overall, China controlled about two-thirds of the total rare earth market in 2021.
China dominates mining, separating individual rare earth elements, and turning raw elements into specialty alloys that go into high-performance parts.
And China’s stranglehold on rare earths supply, along with inflation, are what triggered the last bull market in 2010, when the metals soared as much as 1,000%.
America, on the other hand, let its rare earths infrastructure decay.
Right now, U.S. officials are not happy about China’s rare earths dominance. They don’t want to rely on China for crucial materials needed to arm and supply our military. So they’ve decided to take action.
It’s Time for Rare Earths to Be “Made in America”
As part of their push for rare earths independence, politicians have started suggesting that more rare earth elements should be sourced from within the U.S. or its allies, like Canada.
In June, the Department of Defense (DOD) awarded a $120-million contract to a rare earth metals mining company to build a separation and processing facility for heavy rare earths in the U.S.
With the DOD’s new push for domestic supply, some analysts predict China will lose as much as one-third of its market share by the mid-2020s.
And the market has already reacted to these announcements…
Over the past three months, the rare-earths sector has returned 7% while commodities as a whole have declined by about 12%.
It’s not too late to get exposure to this trend. Because this market is still small, I believe there’s plenty of upside left.
What to Do Next
If you want to get some exposure to the coming surge in rare earth elements, consider the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX). This is an exchange-traded fund that holds a basket of companies involved in rare earths.
However, since these are small companies, be sure to position size any investment appropriately. And as always, do your due diligence before investing.
What’s more… we have several rare earth-focused companies in our Super Spike Advisory model portfolio. These stocks have the best potential to profit from the continuing bull market in rare earth elements. If you want to check it out, go here.
This could be the beginning of another bull market in rare earth elements. As demand soars, companies with deposits located close to home could reap windfall profits.
Good investing,
Andrey Dashkov
Analyst, Casey Research