The resources sector may have outperformed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) by a significant margin over the last six months, but one leading broker still thinks there are a number of great options for investors.
According to a research note out of Goldman Sachs late last week, the broker thinks resources shares have significant upside ahead of them.
The broker has pointed to the fact that resources shares are still only trading on a forward EV/EBITDA multiple of 6.5x. This is approximately 10% lower than the 20-year average.
This assessment has been made based on current spot commodity prices, which means there could be even greater upside if strong global growth leads to further increases in prices.
The three shares which Goldman likes the most in the sector are summarised below:
Alumina Limited (ASX: AWC)
This Australia-based company is engaged in investing in bauxite mining, alumina refining and selected aluminum smelting operations through its 40% ownership of Alcoa World Alumina and Chemicals. The broker has a conviction buy rating on Alumina's shares despite their 23% rise over the last 12 months.
Origin Energy Ltd (ASX: ORG)
Goldman also has a conviction buy rating on this integrated energy company which is focused on gas and oil exploration and production, power generation, and energy retailing. I would have to agree with the broker on this one. I think Origin is attractive at the current share price even though its shares are up 30% since this time last year.
OZ Minerals Limited (ASX: OZL)
Lastly, Goldman has tipped this leading copper producer to shine in 2018 and has given it a buy rating. Considering the positive outlook for the global economy, I expect that copper demand could remain strong and prices could stay at their high levels this year. While I would prefer to gain exposure to copper through BHP Billiton Limited (ASX: BHP), I still think OZ Minerals' shares are worthy of consideration.
