Since hitting the market over a year ago, the entire gamut of rare earth metal companies has been on a tear. Many of these stocks have gained several hundred percent over the past year as investors embrace a sector that's virtually dominated by China, in terms of net supply.
Minerals like yttrium, lanthanum, praseodymium and holmium are but a few rare earth elements (REEs) embedded in the earth's crust.
Any commodity or a group of commodities in supply deficit is a recipe for profits. Investors assume REEs are the next big thing and have embraced the sector, driving share prices to bubble valuations.
But according to The Wall Street Journal, the party might be over.
Short sellers are swarming the small rare earth sector this summer compounded by some insider selling at one of the leading North American REE producers. Some of these stocks are down more than 35% off their peaks.
However, everyone is pretty convinced that these critical metals are here to stay. I agree. They're important components potentially made difficult to secure because China controls such a vast expanse of the minerals. But everything has a price and the big rally for these stocks looks like it's exhausted. Better to wait for the bust, and then build fresh positions.
