Although the resources sector is a volatile and difficult place to invest, I still think it can be good to have just a little exposure to the sector in order to maintain a truly diverse portfolio.
But with such a wide range of shares to choose from in the sector it can be difficult to decide which is best to invest in.
So I thought I would take a look at a couple of shares to see if there's an opportunity to invest. They are as follows:
BHP Billiton Limited (ASX: BHP)
Mining behemoth BHP is certainly one of the more widely followed shares on the ASX, which generally means that it is priced to perfection. So making an investment in my opinion depends on your view on future direction of oil and iron ore prices. If you believe that prices will improve beyond where they are now then I would snap up shares in a heartbeat. But if you expect prices to fall then I would suggest you avoid BHP for the time being. As I'm bearish on both oil and iron ore, I think there is far more downside risk than upside potential for its shares at this point. Which in my view means that the risk/reward on offer just isn't sufficient enough to make an investment.
Kidman Resources Ltd (ASX: KDR)
This junior lithium miner could be one to consider in the resources sector. Although it isn't my first pick in the industry, I do believe that the majority of the lithium miners have bright futures ahead of them due to the growing demand for lithium and the lack of additional supply coming to market. With governments across the world looking to fight rising pollution levels by banning internal combustion engine vehicles in the not so distant future, I expect electric vehicle sales will go through the roof. As these are currently powered by lithium batteries, I expect this to support the high prices the metal commands today. I would class Kidman as a buy at around 50 cents.
