New Trade for July 23rd 2020

Futures are slightly green today after yesterday’s modest gains.  The big news yesterday came after hours when EV giant Tesla delivered big on earnings and reported its 4th consecutive profitable quarter, making TSLA eligible to join the S&P 500.  

If you’re looking for an interesting way to play electrification you might want to investigate rare-earth magnets.  What we found was incredibly interesting.  Moreover, we were thrilled to discover the news of another recent special purpose acquisition company (SPAC) merger which offers an opportunity to invest in rare earth metals.

News of the coming merger between Fortress Value Acquisition Corp. (FVAC) with privately held MP Materials sent the share price up over 35% last week.  This morning in premarket trading the stock is taking a hit.  The reason for this dip is Chamath Palihapitiya, a well known venture capitalist and known investor in MP Materials failed to mention the company in an early morning interview.  This shakedown hopefully will offer a nice dip for traders to get in at a good price.  

Regardless of the interview, we think FVAC is worth checking out.  

MP, which refers to Mountain Pass mine in CA, is the only rare earth metals mine in the US, the largest in the western hemisphere.  Rare earth metals are 17 obscure elements at the bottom of the periodic table that show up in a variety of industrial, military and technology applications.  These rare earth metals are an increasingly critical part in electrification and climate change technologies- which are expanding rapidly in worldwide adoption.  

Business for MP isn’t bad now, but management’s plan to use the new capital from the SPAC merger and complete its own processing plant in the US.  This plan would make the company independent from processors in China.  It also means higher sales and margins than currently realized.

MP reported $10 million in adjusted EBITDA during  the first quarter.  The company’s financial projections estimate $250 million in EBITDA by 2023.  FVAC could be the long term investment you’ve been looking for.