Although the resources sector has a reputation for being one of the more volatile sectors on the share market, I do believe it is well worth having at least a little exposure to it in order to maintain a truly diverse portfolio.
With that in mind, should these three resources shares be the ones you invest in?
Kidman Resources Ltd (ASX: KDR)
Since I last suggested that investors look at Kidman Resources back in August its shares have almost doubled in value. Unfortunately, I think this means that the ship has sailed in terms of making an investment, at least for now. While I think the lithium miner has a fantastic asset and the potential to generate high levels of free cash flow in the future, I don't see a compelling enough risk/reward on offer here at the moment compared to some of its peers.
Santos Ltd (ASX: STO)
Although this oil and gas producer's shares haven't performed quite as strongly as Kidman Resources, they have still been amongst the best performers on the market during the last three months. Rising oil prices and a sharp reduction in costs have been the catalyst for Santos' 30% gain. Pleasingly, if oil prices remain in or around the current levels in the medium to long-term, I think Santos could prove to be great value even after its recent rally.
Western Areas Ltd (ASX: WSA)
Although opinion is largely divided on this nickel producer, I do believe it is positioned perfectly to profit if nickel prices improve in the future. Considering electric vehicle usage is expected to grow exponentially over the next couple of decades and nickel is used inside many lithium ion batteries, I do think there's a chance that nickel prices could recover. This could make it worth considering in my opinion.
