Macquarie says it’s time to back resource stocks

After a heavy sell off, should you consider buying mining stocks?

a woman

Investment bank Macquarie Group (ASX: MQG) is reported by The Australian to have forecast the resource sector to outperform the wider S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) and generate a total shareholder return of 16.6% relative to a 12.6% return from the index over the next 12 months to September 2014.

Growing investor confidence in the resource sector would appear to be reasonably widespread. According to a recent Research Report by broking house Wilson HTM (ASX: WIG) there has been a “sharp decrease in short positions in the resources sector” over the past few weeks with shorting levels back to two-year lows. This fact suggests short sellers see limited downside at current prices within the resource sector.

Likewise the rally in certain resource stocks over the past few months has been dramatic. Iron ore miner Fortescue Metals (ASX: FMG) has rallied 34% and Rio Tinto (ASX: RIO) is up 18% since June. While the iron ore and diversified miners have enjoyed some broad based support, one sector to have been left behind is gold miners. Although up from its $9.07 low reached in June, over the past three months Newcrest Mining (ASX: NCM) has gained just 6.4%, which means it has underperformed the S&P/ASX 200 Index’s 9.8% return.

The election of a Coalition government also provides a boost for the resource sector. The expected repeal of the mining tax and carbon tax coupled with a mandate to increase infrastructure spending should all help create a positive investment environment for mining stocks going forward.

Foolish takeaway

The near-term rally in a number of mining stocks hides the fact that the sector has significantly underperformed calendar year to date. Potential opportunities within the gold mining sector and the broader mining sector are likely to still be there and awaiting investors prepared to sift through the dirt to find a few hidden gems.

Undervalued resource stocks could provide exciting returns for investors however they don’t have a good history when it comes to dividends. Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Tim McArthur owns shares in Macquarie Group and Wilson HTM.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »