Rare Earth Roulette, The Smug and the Mighty...
Featuring MP, GME... and my latest podcast interview at 33RPM and what you might have missed.
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▶ Monday Mashup...
Rarely do I get things this right, but I’ll take credit for this one... In the second of my reports red-flagging MP Materials in April, I noted: “If there is an overriding theme here, it’s that if there is any industry that proves the fallacy of protectionism and the genuine need for geopolitical cooperation, it’s rare earths.” That’s now obvious with the recent deal struck between the U.S. and China on rare earths. The dynamics of that industry stretch well beyond any shoreline or territory or border. But as I wrote in my original report, which laid out the first rung of my MP thesis, the risk with my thesis was two-fold: “Headline risk in the sense that MP is a pawn in a geopolitical war, the outcome of which nobody can predict.” And: “Bravado risk in the sense that it’s impossible to say what Trump will tweet next.”
What happens next? Well, based on the recent spike in MP’s stock since around the time I wrote about it, it’s fair to say that investors have forgotten how rare rare earths really aren’t and the reality of how MP really fits into the scheme of things.
I laid all of this out in my reports, which is why it’s hard to disagree with these assessments from a discussion thread regarding MP on the Value Investor Club the other day, where one poster who seemed positively inclined wrote that “MP is a kind of a rare earth meme stock much like quantum computing stocks and small nuclear reactors now. Seems the news flow for MP will be positive and that's what matters with these kinds of stocks.”
That prompted a bearish poster, who has written what appears to be well-reasoned reports critical of MP to counter: “I think the difference is that we won’t know about whether QBUT [Quantum Computing Inc] and OKLO [my red-flagged nuclear name] succeed or fail for many years. MP is a real company, with a real asset, that produces real things today. We think they will mission volumes, price and cost every quarter, and not solve the U.S. magnet shortage. If we are right, that’s your negative news flow. And when their asset doesn’t work, someone else will solve the U.S. magnet shortage (my money is on the Japanese + recycling) and rare earths will fall out of the headlines. This should all happen in the next 6 months. April to June should prove to be peak rare earth headlines.)”
What do I think? I think what the bearish guy said about the years it will take Quantum Computing and Oklo to succeed or fail is a critically important concept to understand. It is something I’ve spent an extraordinarily significant amount of time thinking about... and will likely play a role in how I approach red flags in the future. (More about this for premium subscribers in an upcoming post.) But nothing got my attention more than the comment that MP is a “rare earth meme stock” and that positive news flow is really all that “matters with these kinds of stocks.” That tells you all you need to know regarding how little fundamentals matter to some of these stocks... and how it’s all really about the headlines and the algos. Of course, that’s what they used to say about Gamestop, which last week lost a quarter of its value in a single day...
Or this wide shot for a reminder of why it pays to Respect the Risk...
Oh, how the smug and mighty have fallen.
▶Moving on, if you missed it, recent reports...
The Real Story Behind NRG’s Sizzling Stock. And why its earnings might not be what they appear.
Stock Promotions on Steroids. Here’s one that should trade for pennies.
The Latest in the Saga of Symbotic. Connecting the dots.
Happy Days...! YOLO, FOMO, MOMO. No, it’s not different this time.
The Games Signet Plays, with some updates.
Why I’m Red-Flagging SiteOne. The company appears to be in denial that it’s a rollup in the process of resetting.
▶Head’s up... Yesterday, if you wondered why you received two copies of what I wrote, it was to correct the spelling of the NRG CEO’s name – something I realized within seconds of it being sent. Once a journalist... The rule is to fess up when we mess up... assuming those rules matter, anymore.
▶Finally, my latest podcast interview... Usually when I’m interviewed I’m talking at the equivalent of 78 RPM – so fast I often have trouble keeping up when I re-listen. This one – on the highly regarded, no-nonsense Schroders Value Perspective, which you can listen to here or here – is the equivalent of me unplugged... at closer to 33 RPM, or as close as I get.
We cover a lot of ground... how I stumbled into journalism, how social media and Substack are reshaping business news – and what I’m learning (you’re never too old!) and how I’m adjusting; the rules of engagement for financial reporting; the future of short-selling and why markets need it; and finally – of course – why I fly red flags. Enjoy!
DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts and filings, and should not be construed as personal investment advice. (Because it isn’t!) I do not have a position in any stock mentioned here.
Feel free to contact me at herb@herbgreenberg.com