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Should you buy these 3 resources shares?

According to President Trump’s tweet last night, the United States is not in a trade war with China.

This news went down very well with financial markets, leading to the Dow Jones Industrial Average rebounding strongly from heavy early declines in trade overnight.

So with concerns over a global trade war easing, at least for now, I believe resources shares could be due for a rebound.

With that in mind, are these three resources shares in the buy zone?

BHP Billiton Limited (ASX: BHP)

If you only want one resources share in your portfolio I would make it BHP Billiton. I think its high-quality assets and strong balance sheet make it a stand out pick in the sector. Especially given the positive outlook for the key commodities that it produces. Another bonus is its generous dividend which provides investors with a trailing fully franked 4.3% yield.

Fortescue Metals Group Limited (ASX: FMG)

There’s no denying that this low-cost iron ore producer’s shares look very cheap at their current levels. However, the widening gap between the benchmark 62% fines and Fortescue’s low-grade ore has continued to widen, lowering its profitability. If the discount improves, or at least stabilises, then I would consider Fortescue as a buy. But if the discount widens further then I’d be staying away from the miner. I’d class its shares as a hold at this point.

Western Areas Ltd (ASX: WSA)

It isn’t only lithium demand that is expected to grow strongly over the next few years as a result of the electric vehicle boom. Nickel demand should also increase due to its use in lithium-ion batteries. This could put Western Areas in a position to deliver bumper profit growth over the next few years and makes it one to consider in the resources sector in my opinion.

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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 Scott Phillips.

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