2 Things Every USA Rare Earth Investor Needs to Know

Rare materials and magnet stocks are among the most talked-about stocks on the market today. Stocks like USA Rare Earth (NASDAQ: USAR) and MP Materials (NYSE: MP) have caught investors' attention this year as they offer the U.S. a secure domestic supply of materials and products essential to the modern economy. That's a critical consideration given the ongoing trade conflict and China's dominance of the industry.

With that in mind, here's a closer look at USA Rare Earth.

Image source: Getty Images.

The stock price is moving on speculation, not facts

Investment theory holds that investors calmly price in changes in risk and rational assumptions into stock prices. However, the implied volatility in the stock price charts of USA Rare Earth and MP Materials suggests otherwise. For reference, 30-day rolling volatility is the annualized standard deviation of a stock's daily returns over a 30-day rolling window.

Whereas a relatively stable blue chip stock like Coca-Cola might have a range of 15% to 20%, a very high-volatility stock might have a figure above 70%.

USAR data by YCharts

Simply put, both stocks are being bought and sold on speculation and developments in trade negotiations between the U.S. and China, and given that the latter controls almost 70% of global rare-earth materials production and 90% of rare-earth materials processing, and has consistently used it as a negotiating weapon, there will likely be more volatility to come.

A derisking event was ignored

The point about speculation guiding matters hit home when the company recently announced a major derisking event that the market seemed to ignore completely. USA Rare Earth operates an unusual model: It plans to start producing rare-earth magnets first and then potentially source materials from a mine it controls rights to, namely Round Top Mountain in Texas.

As stated in the company's Securities and Exchange Commission (SEC) filings, "While this deposit could potentially provide significant value ... USARE initially will be focused on partnering with ex-China suppliers and building or buying the capabilities we need to profitably manufacture high quality neo magnets in the United States."

On that subject, on Nov. 18, the company acquired a British rare-earth metal and alloy manufacturer, Less Common Metals (LCM), which will secure access to rare-earth metals and strip-cast alloys for USA Rare Earth. LCM does not source materials from China.

The derisking event, which is significant to the company's long-term plans, had no positive impact on the stock price.

What's next for USA Rare Earth?

If you suspect that trade disputes will continue and that the U.S. government will take additional rounds of supportive action to encourage the domestic supply of rare-earth materials and magnets, then investing in USA Rare Earth makes sense. After all, MP Materials received a massive boost in 2025 with investment from the Department of Defense and Apple. Just be aware that this stock is highly volatile and moves on speculation.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.