Is MP Materials Corp. (MP) the Top Rare Earth Producer According to Hedge Funds?
We recently published a list of 13 Most Promising EV Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where MP Materials Corp. (NYSE:MP) stands against the other most promising EV stocks to buy according to hedge funds along with the industry outlook.
According to a September 13 report by S&P Global, the auto industry’s shift to electric vehicles (EVs) is accelerating, with 2026 seen as a pivotal year for adoption. By 2030, over 25% of new passenger cars sold are expected to be electric, as the transition away from internal combustion engines (ICE) gains momentum.
Major automakers are projected to produce over 70% of global EVs by 2030, up from just 10% in 2022. However, a few challenges remain, like range anxiety, especially for those without convenient charging options. Addressing these issues will require collaboration among automotive, utilities, government, and property owners, which could create a way for significant growth in vehicle electrification and potentially end the ICE era.
We discussed the market dynamics of the EV industry in our article, 11 Small Cap EV Stocks to Invest In. Here is an excerpt from the article:
“While the growth in the US and Europe is slowing down, China is picking up a significant pace and dominating the EV landscape. According to a World Economic Forum report, Chinese EVs are much cheaper than their Western counterparts, with an average price of $34,400, compared to $55,242 in the U.S. The price gap is driven by lower labor costs, favorable government subsidies, and more affordable battery sourcing.
Chinese automakers now produce more than half of the world’s EVs and are using their cost advantages to potentially dominate the global market. As Chinese brands gain scale and expertise, their competitive pricing could allow them to challenge Western automakers.”
The Electric Vehicle Shift and Its Economic Impact on Europe
While Europe saw significant adoption of EVs in the earlier years, it has seen a slowdown. According to an October 3 report by McKinsey, the growth of EVs in Europe poses both opportunities and challenges for the automotive industry, which currently contributes $1.9 trillion to the economy.
While electric mobility could add up to $300 billion in gross value added (GVA) by 2035, the industry could risk losing $400 billion if European OEMs’ global market share declines from 60% to 45%.
Key strategies for success include expanding the domestic battery supply chain, improving manufacturing capabilities, streamlining regulations, and investing in R&D and talent development. By proactively addressing these challenges, European OEMs can capitalize on the EV shift, generate new value, and secure the region’s economic future in the automotive sector.
Shifting Gears to the Inevitable Future of Electric Vehicles
In a CNBC interview, Young Liu, Chairman of Hon Hai Technology Group said that the future of the automotive industry will be dominated by electric vehicles, with hybrids playing a limited role due to advancements in battery technology. He made a note of current challenges such as charging times and range anxiety, but expects improvements in battery systems will eliminate the need for hybrids.
Liu outlined a path to profitability for EV companies based on three key strategies: “platformization, modularization, and standardization”. He believes these will help streamline operations and reduce the need for individual investments in proprietary platforms, which is a challenge for traditional manufacturers due to their existing structures.
Our Methodology
For this article, we used stock screeners and ETFs to identify over 40 companies with significant operations related to the EV industry. Next, we narrowed our list to 13 stocks most widely held by institutional investors. The most promising EV stocks are listed in ascending order of their hedge fund sentiment which was taken from Insider Monkey’s Q2 database of 912 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Heavy machinery at work in a mining facility, excavating the earth for rare earth minerals.
MP Materials Corp. (NYSE:MP)
Number of Hedge Fund Holders: 31
One of the most promising EV stocks, MP Materials Corp. (NYSE:MP) is the largest producer of rare earth materials in the Western Hemisphere. It owns and operates the only large-scale rare earth mining and processing site in North America, the Mountain Pass facility.
The company is also constructing a rare earth metal, alloy, and magnet manufacturing facility in Fort Worth, Texas, for producing neodymium-iron-boron magnets and precursor products. Neodymium-iron-boron magnets are found in the electric motors of EVs as they are primarily used in the production of strong permanent magnets.
In 2023, MP Materials (NYSE:MP) began selling separated rare earth products like neodymium-praseodymium oxide and entered into a long-term agreement with General Motors to supply U.S.-sourced rare earth materials for electric vehicle motors. The company also received a $50 million prepayment from GM as part of this agreement.
In April, the company received a $58.5 million award from the U.S. Internal Revenue Service and Treasury to support the construction of the first fully integrated rare earth magnet facility in the U.S., with GM set to be a key customer for these products in their EV production.
The company has also made strides in refining rare earths and produced 272 metric tons of neodymium and praseodymium in the second quarter and selling 136 metric tons. It anticipates a 50% production increase in the third quarter due to demand from a new automotive customer.
Overall MP ranks 11th on our list of most promising EV stocks to buy according to hedge funds. While we acknowledge the potential of MP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.