Interesting Times Await Rare Earths ETF

For Whom The Bell Tolls. Classic Hemingway book. Classic Metallica song. And the bell may toll for the Market Vectors Rare Earths/Strategic Metals ETF REMX as soon as this afternoon when Molycorp MCP, the largest U.S.-based rare earths miner, reports earnings. Since its October debut, REMX has accumulated a robust $503 million in assets under management and plenty of controversy along the way. Molycorp was one of 2010's darling IPOs, but haters have chided the company's lack of profitability and excessive valuation, saying that all the hot hedge fund money that has flowed into the stock and other rare earths equities is quite bubble-licious. Regardless of what one's feelings are about Molycorp, its earnings, REMX and the existence or lack thereof a rare earths bubble, the near-term issue facing the stock, and the ETF to a lesser extent, is the expiration of Molycorp's lockup period tomorrow. More than 39 million shares will be unlocked and it's reasonable to expect some will be sold. When others are crucifying Molycorp and REMX on Wednesday (assuming they are both down under selling pressure) remember this: Shares of Molycorp are up 86% in the past six months. Wouldn't you be taking some profits if May 11 was your first chance to do so? The key factor to remember with the expiration of Molycorp's lockup is this: There is only one reason why insiders buy a stock and that's because they think it's going up. However, there are multiple reasons why they sell and insider selling has been proven to be far less predictive of future performance than insider buying. While Molycorp accounts for just 6.72% of REMX's holdings, it is the marquee rare earths name. If it weighs on the ETF in the coming days, it may be more buying opportunity than anything else.