Over the last 12 months the resources sector has once again been a great place to invest.
During this time the S&P/ASX 200 Resources index has provided a return of 15%, compared to an 8.1% return by the benchmark S&P/ASX 200 index. Both figures exclude dividends.
I believe this demonstrates why having a little exposure to the sector can be a very good thing for a portfolio.
With that in mind, should you be buying these resources shares?
BHP Group Ltd (ASX: BHP)
Thanks largely to iron ore prices rocketing higher this year, the BHP share price has zoomed 25% higher in 2019 and hit a multi-year high on Wednesday. Whilst I would consider BHP's shares fully valued now, I still think they would be a great option for investors in search of income.
Based on its last close price, I estimate that its shares provide a forward fully franked 3.7% dividend yield. But this does not include any special dividends which I think are very likely to be declared again in FY 2020 given favourable commodity prices and the high levels of free cash flow that it is generating. For similar reasons, I think industry peer Rio Tinto Limited (ASX: RIO) would also be worth considering even after its strong share price gain.
Newcrest Mining Limited (ASX: NCM)
Newcrest and the rest of Australia's leading gold miners have been on fire in 2019 thanks to a surge in the gold price caused largely by the sudden change in sentiment by the U.S. Federal Reserve. Most economists expected U.S. rates to charge higher this year, but it now looks increasingly likely that they are going to follow the Australian cash rate lower.
If this occurs then it is likely to lift the gold price and the shares of Newcrest. However, I think rival gold producer St Barbara Ltd (ASX: SBM) offers a better risk/reward and would sooner buy its shares for exposure to the precious metal.
