ETFs
Is the SPDR S&P North American Natural Resources ETF (NANR) a good buy right now?
We recently compiled a list of 8 Best Rare Earth Stocks and ETFs. In this article, we’ll take a look at where the SPDR S&P North American Natural Resources ETF (NYSE:NANR) stacks up to other rare earth stocks and ETFs.
Rare earth elements (REEs), which refer to 17 chemically similar metals, are surprisingly abundant in the Earth’s crust. However, their dispersion and geochemical properties make them difficult and expensive to extract, leading to their being described as “rare”.
REEs are important to a wide range of technologies, earning them the nickname “vitamins of modern industry.” In addition to being irreplaceable for the production of clean energy and consumer electronics, REEs are also strategic for defense and aerospace engineering, the production of aircraft, missiles, satellites and communications systems .
It’s no wonder, then, that the global market for rare earth metals is valued at around $1,000.5.65 billion in 2024. Analysts predict that this market will grow steadily, reaching $8.63 billion by 2031. This equates to a compound annual growth rate (CAGR) of 6.2% over this period, which indicates a promising future for the industry.
China has dominated the market for rare earth metals for decades, producing 240,000 tonnes last year, more than five times as much as its closest competitor, the United States, according to the US Geological Survey. data. China further maintains its control by transforming approximately 90% of the world’s rare earths into permanent magnets used in various technologies. In 2022, China accounted for 70% of global REE production. This dominance arises from a combination of factors, including historical geological exploration efforts, favorable mining conditions, and government support for the industry.
Brazil, along with other Western countries, is currently working to break Chinese domination of this industry. Brazil has advantages such as low labor costs, clean energy and established regulations. However, challenges include low rare earth prices, which have fallen by 70%, technical difficulties and obtaining financing. Despite these challenges, Brazil is making progress with its first operating mine and increased government support for the industry. To revive its rare earth industry, the Brazilian government allocated 1 billion reais ($194.53 million) in February to finance strategic mining projects.
Other countries are also working to diversify the supply chain. In recent years, the United States has sought to mitigate REE supply chain risks. This involves restarting domestic mining operations, such as the Mountain Pass site in California, and building processing facilities to avoid reliance on China. This goal of supply chain diversification has also led the United States to enter into agreements with Vietnam on minerals and semiconductors.
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Like the United States, the European Union (EU) also actively promotes domestic extractive projects in countries such as Sweden, Finland, Spain, and Serbia. This is part of the EU’s efforts to strengthen its self-sufficiency in essential minerals, particularly rare earth elements.
Our methodology
To shortlist the best rare earth stocks, we relied on Insider Monkey’s database of 919 hedge funds as of Q1 2024 to analyze hedge fund sentiment for each stock. We selected the rare earth stocks with the largest number of hedge fund investors. Additionally, we’ve included two of the best rare earth ETFs, chosen for their impressive 3-year returns. Why are we interested in stocks that hedge funds are piling into? The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small and large cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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SPDR S&P North American Natural Resources ETF (NYSE:NANR)
Return over 3 years: 13.27%
Assets under management: $533.88 million
The SPDR S&P North American Natural Resources ETF (NYSEArca:NANR) is an investment vehicle that provides exposure to companies operating in the natural resources sector. This ETF focuses on sectors such as energy, metals, mining and agriculture.
The ETF’s total assets under management exceed $533 million, with a gross expense ratio of 0.35%. As of May 31, 2024, the fund’s net asset value return stands at 12.09% year-to-date, slightly behind the S&P 500’s year-to-date returns of 14.75 %.
The fund’s top 10 holdings are diversified across various sectors, including materials, energy and consumer, with investments in companies like Freeport-McMoRan Inc. (NYSE: FCX), Newmont Corporation (NYSE: NEM), Exxon Mobil Corporation (NYSE:XOM). and Chevron Corporation (NYSE: CVX).
The SPDR S&P North American Natural Resources ETF (NYSEArca:NANR) has an estimated 3-5 year EPS growth rate of 9.84% and a distribution yield of 2.26%, making it one of the best rare earth ETFs.
Overall NANR ranks 8th on our list of the best rare earth stocks and ETFs to buy. You can visit 8 Best Rare Earth Stocks and ETFs to see other rare earth stocks and ETFs that are on hedge fund radar. While we recognize the potential of NANR as an investment, our conviction lies in the belief that AI stocks hold more promise in terms of higher returns in a shorter time frame. If you’re looking for an AI stock that’s more promising than NANR but is trading at less than 5x earnings, check out our report on the cheapest AI stock.
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Disclosure: None. This article was originally published on Initiated Monkey.