Should you buy these resources shares?

With the global economy expected to grow strongly for at least the next couple of years, I expect demand for many commodities will increase meaningfully.

Ultimately, I believe this could lead to the resources sector continuing its outperformance for some time to come.

With that in mind, should you buy these three resources shares?

BHP Billiton Limited (ASX: BHP)

The BHP share price may have gone gangbusters over the last 12 months but I don’t believe it has peaked just yet. Especially if strong global economic growth supports the favourable prices of the commodities it produces. Another potential positive on the horizon is the sale of its shale assets in the United States. The funds raised from this probable sale could find their way back to shareholders through share buybacks or even a special dividend.

Oil Search Limited (ASX: OSH)

This energy producer’s shares have exploded higher in recent weeks after oil prices climbed significantly. If oil prices remain at these levels or move higher then I think Oil Search would be likely to deliver bumper profit growth in FY 2019 that justifies the share price gain. However, if they give back some of these recent gains and drop below US$70 a barrel again, then I fear Oil Search’s share price could be dragged lower.

Resolute Mining Limited (ASX: RSG)

Last month this leading gold miner released its quarterly activities report which revealed an all-in sustaining cost of US$1,051 per ounce. While this is well above the current spot gold price of US$1,315 per ounce, I’m quite bearish on the gold price due to rising rates and widening bond yields in the United States. Because of this, I am concerned that Resolute’s margins could get squeezed over the next 12 months. But if you aren’t as bearish on gold then this gold miner could be a decent option as it is relatively good value in comparison to some of its peers.

Not keen on resources shares but want outperformance? Then these top shares could be the ones to buy.

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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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