The Allure of Rare Earths (and Why I Still Can’t Sleep)

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I once told my uncle that investing in rare earths was like farming for elves-everyone’s doing it, but no one knows where the damn elves are. Still, here we are: USA Rare Earth (USAR) has risen 31% this year, riding the hype of its Oklahoma magnet factory. But let’s not mistake a press release for a profit margin.

Two Fool.com contributors weigh in. One, Scott Levine, insists this is the “robust market opportunity” of the decade. The other, Lee Samaha, suggests you might want to check your pockets for loose change. I’ll take a seat between them, clutching a lukewarm cup of coffee and wondering if I’ve misread the entire thing.

A Competitive Advantage That Smells Like Texas Rain

Scott Levine: MP Materials (MP) gets all the attention, but USA Rare Earth has quietly been playing the long game. While MP specializes in neodymium and praseodymium-the light stuff-USA Rare Earth has its claws in the heavy rare earths at Texas’s Round Top deposit. Dysprosium and terbium, they call them. Sounds like the names of my exes. But apparently, these minerals make magnets “heat-resistant” and “better suited for certain applications.” Which is to say: useful. Possibly. If someone ever needs a magnet that doesn’t melt in a sauna.

Besides rare earths, Round Top also has gallium. Gallium? Oh, right, the stuff in semiconductors and defense tech. China controls 98% of it, which is a problem. But USA Rare Earth says, “We’ll fix that!” I believe them. I also believe in my neighbor’s theory that the moon is made of cheese. Both are equally likely.

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Management claims their $3 trillion GDP opportunity is a “robust” play against MP’s $1 trillion. Let me translate: They’re betting on a bigger pot of gold. But as my mother always says, “If it sounds too good to be true, it probably smells like garlic and regret.”

Capital-Raising: The Never-Ending Fundraiser

Lee Samaha: USA Rare Earth’s future is bright, but so is the risk of needing more money than a Las Vegas slot machine. Their three-stage plan is the financial equivalent of a three-act play where the protagonist keeps needing more tickets. Stage one: Build a magnet factory in Oklahoma. Stage two: Scale it up. Stage three: Mine Round Top. Each step requires capital, execution, and the kind of luck that usually eludes people who invest in “promising ventures” while wearing mismatched socks.

Management’s 10-K filing mentions partnering with “ex-China suppliers” to build capabilities. A noble goal, if you ignore the fact that “ex-China suppliers” might be a euphemism for “we’re not sure where the materials will come from yet.” And Round Top? It’s not critical to the magnet business, they say. But it’s critical to the investment case. Which is like saying your therapist isn’t critical to your happiness-unless you’re trying to get a promotion.

Risks? There are enough to fill a spreadsheet. Execution risk, pricing risk, funding risk. It’s the financial equivalent of a buffet with a “no refunds” sign. And yet, I can’t help but think of my cousin, who bought into a cryptocurrency in 2017 because it had a cute mascot. He’s still waiting for his returns.

To Buy or Not to Buy? That Is the Question

If you’re the type who buys stocks based on a company’s “vision,” USA Rare Earth might be your jam. But if you’d rather not spend your evenings Googling “dysprosium vs. dysentery,” this might not be your cup of tea. For those already holding MP Materials, a dip into USA Rare Earth could diversify the portfolio-or serve as a reminder that even the most “robust” opportunities sometimes crumble like a poorly constructed lasagna.

Ultimately, the decision depends on your risk tolerance. Or, as I’ve learned from years of trying to balance my own portfolio: it depends on whether you’ve had enough caffeine to stop caring. ☕️

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2025-09-21 20:02