VanEck Rare Earth ETF's Top Holdings Lack Profitability
The VanEck Rare Earth and Strategic Metals ETF, a popular investment choice for those seeking exposure to critical minerals, has its top five holdings dominated by companies from China, USA, and Australia. However, a closer look reveals that none of these companies are currently profitable, raising concerns about the ETF's fundamentals.
The top five positions in the ETF include China Northern Rare Earth High-Tech Co., Ltd. (11.4%), Shenghe Resources Holding Co. (not specified), MP Materials (10.5%), Lynas Rare Earths (7.2%), and Pilbara Minerals (6.0%). Together, they make up over 40% of the ETF's weight. Despite their significant presence, none of these companies are profitable.
Lynas Rare Earths, for instance, has seen its revenue come under pressure and profits plummet, despite a rising stock price. Meanwhile, China Northern Rare Earth High-Tech has volatile revenue and a declining gross profit margin, with profits not considered sustainable. MP Materials has declining revenue and a catastrophically high cost of sales, while Albemarle, weighted at 6.6%, has seen its revenue and profits collapse, with its stock price falling by 75% since October 2022. Pilbara Minerals, too, has plummeting revenue and has completely lost profitability, with a stock price increase not based on fundamentals.
Investors should be aware that while the VanEck Rare Earth and Strategic Metals ETF offers diversification across 21 companies, its top holdings currently lack profitability. Given the importance of rare earths and strategic metals to modern technology and industry, it's crucial for investors to carefully consider the risks and fundamentals of the companies they're investing in, even within a diversified ETF.
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