In order to maintain a truly diverse portfolio, I think a little bit of exposure to the resources sector is needed.
If you don't already have exposure to the sector, now could be a great time to consider doing so thanks to the positive outlook for the global economy.
Are these three resources shares the ones to buy?
BHP Billiton Limited (ASX: BHP)
Although BHP Billiton delivered a bumper first-half profit result earlier this week, it fell a little short of the market's expectations and has led to its shares losing 4% of their value week-to-date. I think investors should use this as an opportunity to snap up its shares at a cheaper price. After all, with global economic growth expected to be strong over the next 12 months at least, demand for the commodities it produces should remain high, keeping prices favourable. It also provides investors with a generous dividend yield.
Galaxy Resources Limited (ASX: GXY)
Investors that have a high tolerance for risk might want to consider this leading lithium miner. Galaxy Resources remains my pick of the industry thanks to its world-class assets, lowering operating costs, and sizeable free cash flows. While opinion is divided on whether lithium supply will overtake demand in the future, I remain confident that demand will be strong enough to keep prices high for a number of years to come. This could lead to bumper profit growth for Galaxy Resources in FY 2018 and beyond.
Syrah Resources Ltd (ASX: SYR)
Another topic that is dividing opinion is Syrah's massive Balama graphite project. There are concerns that the project could add too much supply to the market, leading to a large slump in prices. Short sellers appear convinced that this will happen and have been grabbing hold of as many shares to short as possible. In light of this, Syrah has been the most shorted share on the ASX for many months. Due to the high level of short interest, I think investors ought to sit this one out.
