iPhones & Teslas: 2 Rare Earth ETF Bets

September 10, 2014

With so much focus on new tech, is there a hidden play in ETFs?

I get it. I’m a gadget freak too. I wear a UP24 fitness tracker. I carry an iPhone and an iPad with me pretty much everywhere. I lust after a Tesla Model X to replace the family minivan. And while plenty of investors have piled into the companies delivering us these innovations—witness Apple’s half-trillion-dollar market cap, and Tesla’s $35 billion—I sometimes think that misses the point.

Investing is often about finding the scarcity and grabbing hold. Yes, of course, investing in companies that will generate earnings over the long haul through innovation, savvy marketing and superior execution is fantastic, and that’s what Apple and Tesla owners are hoping for.

But often, finding the corners of the market where someone has something everyone needs is a great way to play long-term defense.

So what do the gadget makers really need? Well, talent and capital, for sure.

Expensive Dirt

They also need dirt, the really expensive kind of dirt. Call them “rare earth” or “strategic metals,” the tech economy is enormously dependent on metals like zinc, lithium and germanium to make all the cool stuff I always end up buying. And it turns out, there’s a lot less of that stuff around than we might like—hence the “rare.”

The Wall St. Journal covered the situation in one metal today—zinc. Compared with some of the more exotic elements, zinc is still relatively abundant, and isn’t even considered a rare metal, just a base one. But it’s starting to get thin in the warehouses. Metals like lithium—the key element in all those Tesla batteries—are facing much more significant crunches.

And yes, there are ETFs to play this trend of scarcity.

The purest play is the Global X Lithium ETF (LIT | D-91). It holds the 20 most important lithium-focused companies, and is in fact a great pure play—as its ETF.com “Fit” score of 91 suggests. The issue for investors is that it has consistently

Lit

 

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