Investing in speculative plays involves a great deal of risk but, in all candor, offers high yields. After all, fortune favors only the brave as in the case of investors of rare earths producer Molycorp Inc. (MCP). The stock touched a new all-time high of $79.16 on Tuesday before closing at $77.54.
Rare earth metal stocks have been in the news since late last year, following China's strategic move to limit exports of rare earth metals. With a ton of media attention there has been a strong speculative interest in the rare earths sector.
We alerted readers to MCP last September when the stock was trading around $28. Had you bought this stock then, you would have made nearly 180% in just a little over 7 months, based on the current trading price.
China slashed its rare earths export quota for 2011, and beginning April 1, has hiked taxes on rare earth elements. Since the beginning of this year, prices of major rare earth metals have doubled, according to reports.
Given the near-term strength in the rare earths market, equities research analysts at Dahlman Rose have boosted their price target on MCP to $125 from $85.
Last month, Molycorp acquired Santoku America, a producer of rare earth alloys and metals, for $17.5 million in cash. This acquisition provides Molycorp with the capability to manufacture and sell rare earth alloys for the production of neodymium iron boron magnets and samarium cobalt magnets, as well as a variety of other specialty alloys and metals.
Molycorp is scheduled to report its first quarter 2011 results after the market closes on Tuesday, May 10.
You might also want to have a look at some of our other winning stocks, and here's the complete list of stocks that have thus far made double (50% and more) and triple digit gains since 2010.
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