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Should you buy these resources shares?

Credit: iStock

After charging higher for much of the last 12 months, the resources sector has come under significant pressure in the last couple of weeks.

This has led to the S&P/ASX 200 Resources (Index: ^AXJR) (ASX: XJR) falling 6% since May 17.

Should you seize on this weakness to buy the shares of these three resources companies?

BHP Billiton Limited (ASX: BHP)

The shares of this mining giant have now dropped almost 7% from their 52-week high. While BHP Billiton isn’t the bargain buy it was 12 months ago, I do see a lot of value in its shares. However, recent events in Italy could throw a spanner into the works. There are concerns that Italy could be next in line to follow the UK out of the European Union. If this stifles global economic growth then it could put pressure on commodity prices and BHP Billiton’s profit growth. I’m optimistic that it will not come to this and that the mining giant would be a good investment, but it is still worth taking this possibility into account before investing.

Oil Search Limited (ASX: OSH)

It has certainly been a rollercoaster of a month for this energy producer. Its shares started the month at $7.91 before surging over 9% higher to $8.64 amid rising oil prices. But with oil prices now giving back a lot of their gains, Oil Search’s shares are almost back to where they started. Which I think makes them about fair value based on current oil prices. Because of this, I would suggest investors hold off an investment for the time being and wait to see if oil prices stabilise.

Western Areas Ltd (ASX: WSA)

One commodity that has continued to appreciate is nickel. According to Reuters, Shanghai Futures Exchange nickel climbed 2.8% to US$17,592 a tonne yesterday. This stretched its month to date gain to almost 8% and means the base metal reached a three-year high. Nickel prices have been rising as investors bet that demand for the metal will increase in line with China’s electric vehicle boom. I think Western Areas could be worth a closer look, especially after recent share price weakness.

But if you're not keen on resources shares then these potential market-beaters might be more to your liking.

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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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