Should you buy these ASX resources shares?

Over the last 12 months the resources sector has been one of the best performing areas of the market.

During this time the S&P/ASX 200 Resources (Index: ^AXJR) (ASX: XJR) has made an impressive gain of 25%, compared to the S&P/ASX 200’s 9% gain.

It is worth noting that the latter includes the contribution from the resources sector. Take that out of the equation and the benchmark’s gain would be notably lower.

I believe this strong gain demonstrates why having a little exposure to the resources sector can be a good thing for portfolios.

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

BHP Billiton Limited (ASX: BHP)

My favourite resources share on the Australian share market would have to be the Big Australian. Although its shares have been on a strong run of late, I don’t think it is too late to consider an investment. Especially given the favourable prices of a lot of the commodities that it produces. In addition to this, I believe that recent asset sales mean that there’s a good chance of funds being returned to shareholders in the form of special dividends or share buybacks.

Rio Tinto Limited (ASX: RIO)

Another top option in the resources sector could be Rio Tinto. Last week the mining giant advised that it will return approximately $3.2 billion of post-tax coal disposal proceeds to its shareholders via share buybacks. I believe this, its high quality operations, and favourable commodity prices will lead to solid earnings and dividend growth in FY 2019.

Syrah Resources Ltd (ASX: SYR)

On Thursday this graphite miner’s shares touched on a multi-year low of $2.17. Concerns over the oversupply of the battery making ingredient, disappointing sales, a $94 million capital raising, and production disruptions have weighed heavily on its shares this year. While its shares do look reasonable value now, I’m waiting for a major improvement in its overall performance before considering it as an option.

Not keen on resources shares? Then check out these potential market-beaters.

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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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