3 great value resource stocks: Fortescue Metals Group Limited, Santos Ltd and Oil Search Limited

These 3 resource plays could be worth buying right now: Fortescue Metals Group Limited (ASX:FMG), Santos Ltd (ASX:STO) and Oil Search Limited (ASX:OSH).

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One of the most difficult things about being an investor is to hold your nerve when emotions start to overcome you.

For instance, if you want to 'buy low' then you must accept that this will be done when the future looks decidedly uncertain and news flow is relatively negative. Similarly, 'selling high' usually involves going against the wider market when all is rosy and the future seems like one long journey filled with growth.

Clearly, the situation regarding commodity and resource stocks at the present time is one of uncertainty and disappointment. However, it does mean that there are a number of stocks trading at very appealing prices. Here are three prime examples.

Fortescue Metals Group Limited

With the price of iron ore having fallen heavily in recent months, the share price of Fortescue Metals Group Limited (ASX: FMG) has sunk by a whopping 56% in the last year. Clearly, this has been disappointing for existing investors who are now likely to be sitting on considerable losses.

However, looking ahead, Fortescue seems to offer good value for money at its current price level. For example, it trades on a price to book (P/B) ratio of just 0.88, which is considerably lower than the ASX's P/B ratio of 1.23. Certainly, write downs to Fortescue's asset base may be on the horizon, but such a low P/B ratio seems to already price much of these in.

And, while the iron ore price is nigh on impossible to predict in the short term, Fortescue could prove to be a sound, albeit volatile, investment for the long term, with an upward adjustment to its valuation being on the cards.

Santos Ltd

The finances of Santos Ltd (ASX: STO) remain a concern for many of its investors. After all, it has recently seen its credit rating downgraded to BBB by S&P and with various projects ongoing there is a concern among investors that the resulting higher interest costs may make some of its projects economically unviable. As such, its share price has fallen by 48% in the last year.

Despite this, Santos could still be worth buying. After all, much of this concern seems to be priced in, with the company's dividend yield of 4.7% indicating that its shares are attractively priced at their current level.

And, with its bottom line still forecast to grow over the next two years by mid to high-single digits, Santos could be a surprisingly strong performer moving forward.

Oil Search Limited

With there being various predictions that the price of oil could fall below $40 per barrel in the near term, shares in Oil Search Limited (ASX: OSH) remain hugely volatile. Furthermore, investor sentiment in the sector remains relatively weak, with the oil sector having a price to earnings (P/E) ratio of just 8.2, for example.

Oil Search, though, trades on a significantly higher P/E ratio than its sector of 18.9 and the key reason for this is that it is still expected to post earnings growth of 65% per annum over the next two years, with its liquefied natural gas (LNG) projects being forecast to provide its bottom line with a significant boost.

So, while on the face of it Oil Search may look hugely overvalued (its P/E ratio is over twice that of the wider sector, after all), it could turn out to be a winning investment.

Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.

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