Molycorp Popped Again: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Just eight days after surging 11%, Molycorp (NYSE: MCP  ) was on the move again today, up close to 12% on additional speculation that curbs on Chinese exports of rare earth metals would help its business.

So What: Molycorp has more than tripled year-to-date, and now there's an ETF just for rare earth stocks. The latter prompted Joe Weisenthal at Business Insider to call rare earth a bubble. Even so, investor interest in the ETF could propel shares of Molycorp in the short term.

Now What: Weisenthal's right; rare earth mania has created a bubble. Maybe it's not a bond-sized bubble, but with Molycorp and emerging peers likely to need millions in fresh capital to build out their businesses, it's at least a gum-sized bubble. If you must buy shares, open a small position and gird yourself for the possibility of a 100% loss.

Interested in more info on Molycorp? Add it to your watchlist here by clicking here.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is at least 10% better than other disclosure policies.


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