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Rare Earths ETF Tracks The Essential Materials In Tech Devices

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They are called rare earths, but these obscure metals are found in just about every electronic device.

[ibd-display-video id=2411914 width=50 float=left autostart=true] With unusual names like cerium and tungsten, rare earth and strategic metals are essential for making batteries for portable devices, jet engines, high-definition TVs and many other products. VanEck Vectors Rare Earths/Strategic Metals ETF ( REMX ) tracks these providers of raw materials for the digital age.

"Compared to base metals, they have more specialized uses and are often more difficult to extract," according to the VanEck website. Strategic metals are used in jet engines, hybrid cars, steel alloys, wind turbines, flat screen televisions and cellular phones. Rare earth metals, which are a subset of strategic metals, are 17 chemical elements used mainly in electronics.

It's a specialized field in the metals industry, and chances are you won't find any well-recognized companies in the portfolio. Many are based in mineral-rich countries such as Australia, China, Canada and South Africa.

The largest weighting in the fund, with 8.5% of the value, is Tronox ( TROX ), an Australian miner of titanium ore, zircon and other minerals. Its shares, which trade on the NYSE, have soared about 170% from a breakout to new highs a year ago.

Others large components in the 20-company portfolio are Australian lithium miner Pilbara Minerals, miner China Molybdenum, Canada's Lithium Americas and Galaxy Resources, another Australian lithium miner. All those stocks have performed well at least in the past few months.

The ETF is having a superb year, up more than 60%. The ETF broke out to new highs July 28 and climbed as much as 37% from that point. Now, the ETF has pulled back to the 50-day moving average , where it is finding support. That leaves shares in a follow-on buy area . As the performance improved, so did interest from investors. Average daily volume was about 150,000 shares at the start of the year, but now it's 857,000.

VanEck Vectors Rare Earth/Strategic Metals is having its best year, by far. Last year, an increase in shares of nearly 27% made it another strong year following several years of decline.

The fund was in a downward path from its all-time peak in April 2011 to a low in January 2016. It lost a whopping 90% of its value.

The IBD ETF Leaders index shows the performance of a model portfolio of exchange traded funds that are leading the overall market. A computer algorithm selects the ETFs based on relative strength and other objective performance ratings, with periodic adjustments for market trends and conditions. The universe from which the ETFs are selected includes the funds listed below.

ETF Leaders ( View Full List )

ETF Symbol Category RS Rating Week's Price % Change
VanEck Vectors Rare Earth Strategic Metals REMX Sector Equity 94 5.44
ARK Innovation ARKK U.S. Equity 93 4.11
iShares MSCI Glbl Metals & Mining Producers PICK Sector Equity 64 3.93
Robo Glbl Robotics & Automation ROBO Sector Equity 88 3.88
Guggenheim Solar TAN Sector Equity 89 3.46

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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