Over the last 12 months the resources sector has continued to outperform the market average with a sizeable gain.
During this time the S&P/ASX 200 Resources (Index: ^AXJR) (ASX: XJR) has put on a gain of over 34%.
I believe this gain demonstrates why it can be good for a portfolio to have a little exposure to the sector.
With that in mind, below are two resources shares that analysts on the Macquarie Group Ltd (ASX: MQG) equities desk have rated as buys this week.
Here's why they might be worth a look:
BHP Billiton Limited (ASX: BHP)
A note out of Macquarie reveals that its analysts have an outperform rating and $38.00 price target on BHP's shares. This price target implies potential upside of over 12% excluding dividends. According to the note, the broker expects BHP to complete the sale of its shale assets in 2018. This will give BHP a significant cash balance to use for potential acquisitions or buybacks. Given that management appears happy with its current asset portfolio, the focus may be on buybacks. I think that BHP is the best option in the resources sector right now and would class it as a buy. Though, there is a risk that a global trade war could potentially hold back the mining giant.
Orocobre Limited (ASX: ORE)
Macquarie has also placed an outperform rating on this lithium miner's shares. According to the note, it has increased the price target on Orocobre's shares to $6.60, implying potential upside of 24.5%. The broker made the move after revising its commodity price forecasts. Previously, Macquarie was bullish on Orocobre due to the phase 2 work being done at its Olaroz operation. The broker suspects this could result in strong cash flows being generated from the expansion earlier than expected and provide stable production. While I do believe Orocobre has a great asset in Olaroz, I still feel Galaxy Resources Limited (ASX: GXY) has a better and more diversified asset base. Though, both are high risk investments.
