Is it time to buy BHP Billiton Limited, Rio Tinto Limited and OZ Minerals Limited?

Unloved stocks such as BHP Billiton Limited (ASX:BHP), Rio Tinto Limited (ASX:RIO) and OZ Minerals Limited (ASX:OZL) might be offering investors a once in a decade buying opportunity.

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While the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) gained around 1.7% on Thursday, one sector experiencing particularly solid gains was the resource sector.

By late afternoon trade the share price of BHP Billiton Limited (ASX: BHP) had jumped 2.3%, while peer Rio Tinto Limited (ASX: RIO) was up 1.7% in line with the broader market.

Meanwhile, the share price of copper and gold producer OZ Minerals Limited (ASX: OZL) had soared around 20% on speculation that global private equity firm KKR was attempting to snap up a 10% stake in the beaten down miner.

While investors await confirmation of KKR's intentions, given the continued sell-off in many stocks across the resource sector it is arguably a good time for investors to sniff around for value.

In the case of OZ Minerals, even after today's rally to around $4 per share, the stock still remains at a very significant discount to its net tangible asset backing of $6.68 per share. Given this discount and the healthy state of the group's balance sheet – there is $410 million of cash and no debt – if KKR's supposed interest is a precursor to a tilt at the whole company then arguably there is still value available today.

In the case of BHP, the share price of Australia's largest miner is trading at a decade low. The sell-off is of course somewhat warranted given the decline in commodity prices. However with data provided by Morningstar forecasting earnings per share (EPS) to increase in 2017 to 71.6 cents per share (cps) and the dividend to be a hefty 177.1 cps, the stock is available today on what could be a potential fully franked yield of 7.8%.

The outlook for Rio doesn't appear to be quite as rosy with EPS forecast to continue to decline modestly in 2017 and the dividend to remain flat year on year. Although Rio may be set for a flatter 2017, the stock is arguably available at an even more attractive relative price than BHP.

With EPS of 333.6 cents and a dividend of 304.1 cps forecast, the stock is trading on an expected PE of just under 15 times and with a fully franked dividend yield of 6.1%.

The commodity boom has certainly busted, but that is all part and parcel of the commodity cycle. In fact, right now is the period when the best investment opportunities could be available!

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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