Molycorp Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of rare earth miner Molycorp (NYS: MCP) are down deep -- as much as 13% today -- on continued fears of weakness in rare earth pricing and overall macroeconomic concerns.

So what: Today's selling pressure is follows on the heels of a downgrade and a major price target cut last week from JPMorgan. The whole rare-earth sector is getting hit, with others like Rare Element Resources (ASE: REE) and Lynas Corp (OTC BB: LYSDY) also down substantially, as investors fret over the possibility that speculation had driven rare-earth materials prices to bubbly levels and may come back down to earth.

Now what: A lot of this year's bullishness in the sector is tied to China cutting exports and driving up prices. The JPMorgan analyst who downgraded the stock last week, Michael Gambardella, had mentioned prices for elements like cerium, lanthanum, and neodymium respectively had dropped by 48%, 36%, and 22% from recent highs. When looking for companies to invest in, a sustainable competitive advantage is the way to go. If the only thing a company has going for it is temporary surging prices for its products caused by one government's decisions, that's far from sustainable.

Interested in more info on Molycorp? Add it to your watchlist byclicking here.

At the time this article was published Fool contributorEvan Niuholds no position in any company mentioned.Click hereto see his holdings and a short bio. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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