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Why I would buy these resources shares next year

Due to strong global growth and increasing commodity prices I believe the resources sector has the potential to outperform the broader market once again in 2018.

Two popular resources shares which I think could do a lot of the heavy lifting are listed below. Here’s why I think it could be worth adding them to your portfolio:

BHP Billiton Limited (ASX: BHP)

In FY 2017 iron ore, petroleum, and copper accounted for 81% of this mining giant’s EBITDA. As I’m bullish on these three commodities and expect them to average much higher prices in 2018 than in 2017, I feel BHP could be in a position to deliver bumper profits and strong free cash flow. This should allow it to increase its dividend further, which currently provides investors with a trailing fully franked 3.7% yield.

Fortescue Metals Group Limited (ASX: FMG)

Thanks to improved iron ore prices and management’s decision to increase the grade of its produce, I think Fortescue could outperform the market in 2018. This year I’ve been very impressed with the reduction in both its costs and its debt and expect more of the same next year. The share price could get an additional lift if it follows up on its plan to expand into mining lithium. I think diversifying its business would be a smart move and insulates it somewhat from iron ore’s wild swings like Rio Tinto Limited’s (ASX: RIO) business does.

But if resources shares are not your cup of tea, then these high-flying blue-chip shares could be exactly what you're looking for. I believe they could outperform the market next year as well.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

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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.

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