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.
Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.
One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…
Another is a diversified conglomerate trading over 40% off its high, all while offering a fully franked dividend yield over 3%...
Plus 3 more cheap bets that could position you to profit over the next 12 months!
See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.