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Time to Dig In to Rare Earth Stocks

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"With many driven close to their 52-week lows, here's what to watch for during the second half of 2012."

Minyanville

Rare earth stocks have had a difficult 2012 so far, but there may still be a few bright spots for investors in the sector, with possible M&A and joint ventures on the horizon, one analyst says.

Luisa Moreno at Jacob Securities in Toronto explains that performance-wise, rare earth equities have been following the global trend for commodity equities across the board.

For example, the Market Vectors Rare Earth/Strategic Metals ETF (REMX -0.38%) is down just over 10% this year (as of June 13), while Molycorp (MCP -0.15%) is down 16% year to date, after a 47% tumble in 2011. Avalon Rare Metals (AVL +4.11%) has fallen more than 40% in 2012 after a 47% drop in 2011.

In comparison, Toronto's S&P/TSX Venture exchange is down 16% so far in 2012, while the main index, the S&P/TSX Composite, has fallen 3.8%.

Rare earth prices have also been volatile, with neodymium oxide rising more than 82% in early 2011 due to speculation, but falling around 70% in the six months to April, Chi Weishan, a researcher at Shanghai Metals Market, said via The China Post.

"Then they all of a sudden collapsed significantly because I think there was a lot of stockpiling as well, before that, and with the slowdown in the economy, less demand," says Moreno, although she says prices are starting to level out. . .View Full Article


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