One of the best performing areas of the Australian share market over the last 12 months has been the resources sector.
During this time the S&P/ASX 200 Resources (Index: ^AXJR) (ASX: XJR) has pushed higher by a sizeable 25% compared to a slight decline by the S&P/ASX 200.
The good news is that I believe this outperformance can continue over the next 12 months thanks to the positive outlook for the world’s three major economic forces: The United States, China, and the Eurozone.
Because of this, I think adding a little exposure to the resources sector could be a good thing for most portfolios right now.
With that in mind, here are two resources shares that I would consider picking up:
BHP Billiton Limited (ASX: BHP)
I think that BHP Billiton is the stand out pick in the resources sector right now. With base metal prices pushing higher and oil prices on a tear, I believe the mining giant is positioned perfectly to deliver a bumper profit result in FY 2018 and FY 2019. This should allow the company to increase its dividend meaningfully over the next couple of years. At present BHP Billiton’s shares provide investors with a solid 4% dividend yield.
Rio Tinto Limited (ASX: RIO)
Not far behind BHP Billiton would be Rio Tinto for me. Although I don’t expect the prices of some of the commodities it produces to stay at their inflated prices in the long-term, I believe they are likely to remain notably higher than where they were a year ago. This could lead to solid profit and dividend growth for Rio Tinto over the next 18 months. Another bonus is its sizeable cash balance following its exit from the coal industry. Rather than being invested in new assets, I expect management will return these funds to shareholders through dividends and share buybacks.
Finally, close behind these two mining giants is Fortescue Metals Group Limited (ASX: FMG). While I think its shares are attractively priced, it gets pipped at the post by BHP and Rio Tinto because of their diversified operations.
Three more shares that I expect to benefit from a strong global economy are listed here.
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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.