3 resources stocks for the top of your watchlist

These stocks hold bright futures but could be subject to investors’ myopia.

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The resources industry is always splattered across the front page of Australian newspapers who love to predict the imminent doom which awaits those with exposure to it.

It’s any wonder we’ve got a resources sector at all.

But you see, as the media continues to run stories on job losses, plant malfunctions and huge profit declines, savvy investors are picking up first-class resources stocks on the cheap. For example, investors in companies such as gold producer Silver Lake Resources Limited (ASX: SLR) who bought stock at its low of $0.33 less than a month ago, are today sitting on gains over 50%.

So how can you turn this minefield of an industry into your chief money maker? You can try to time the market with speculative punts, or you can buy established resources companies with proven management and a track record of growing earnings.

For example, one stock which has dropped nearly 4% in the past week is Woodside Petroleum Limited (ASX: WPL). The selloff came after it announced its major shareholder, Shell, would be selling down its stake in the oil and gas producer. In addition, after pulling itself out of the running for a stake in the giant Leviathan gas field off the coast of Israel, shareholders have been left with a number of unanswered questions about the company’s strategy. Further selling pressure could be a good opportunity for long-term focused investors.

Even worse, shares in Rio Tinto Limited (ASX: RIO) have had a disastrous start to 2014 thanks to an iron ore price which was, until recently, seemingly in freefall. With over 90% of Rio’s FY13 earnings derived from the steelmaking ingredient, it’s easy to see why investors have shunned our second biggest mining company. However with a long-term focus, there could be reason to argue that Rio shares have much of the forecast fall in revenues (and therefore profit) already priced in.

After the worst gold price fall in 30 years, investors who took advantage of the substantial discount in gold miner Newcrest Mining Limited (ASX: NCM) have been well rewarded. Falling to a 52-week low of below $7 per share back in December, shares are now up over 50%. With a huge reserves life and low costs, Newcrest will now go about paying down debt and discontinuing unprofitable operations.

3 even BETTER buys

Woodside, Rio and Newcrest are Australia’s best at what they do. Whilst I don’t think all of them are a standout buy at current prices, savvy investors should find a spot for them on their watchlists because there will come a time when they are.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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