If you're looking for options in the resources sector, then read on. The team at Morgans recently named some of their top picks from this side of the market.
Listed below are three of the resources shares that the broker has on its best ideas list:
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BHP Group Ltd (ASX: BHP)
Morgans rates the Big Australian as one of the best options in the resources sector. The broker likes the mining giant due to its strong balance sheet and the diversity of its operations across both commodities and geographies. It explained:
We view BHP as relatively low risk given its superior diversification relative to its major global mining peers. The spread of BHP's operations also supplies some defence against direct COVID-19 impact on earnings contributors. While there are more leveraged plays sensitive to a global recovery scenario, we see BHP as holding an attractive combination of upside sensitivity, balance sheet strength and resilient dividend profile.
Morgans has an add rating and $47.40 price target on BHP's shares.
Santos Ltd (ASX: STO)
Another ASX resources share that Morgans has on its best ideas list is Santos. It likes the energy producer due to its solid growth outlook and diversified earnings base. Morgans commented:
The resilience of STO's growth profile and diversified earnings base see it well placed to outperform against a backdrop of a broader sector recovery. While pre-FEED, we see Dorado as likely to provide attractive growth for STO, while its recent acquisition increasing its stake in Darwin LNG has increased our confidence in Barossa's development. PNG growth meanwhile remains a riskier proposition, with the government adamant it will keep a larger share of economic rents while operator Exxon has significantly deferred growth plans across its global portfolio.
Morgans has an add rating and $9.30 price target on Santos' shares.
South32 Ltd (ASX: S32)
A final ASX resources share that Morgans rates highly is South32. In fact, the mining giant is the broker's top pick in the sector right now. It likes South32 due to the diversity of its operations and its portfolio transformation. The broker explained:
S32 has transformed its portfolio by divesting South African thermal coal and acquiring an interest in Chile copper, substantially boosting group earnings quality, as well as S32's risk and ESG profile. Unlike its peers amongst ASX-listed large-cap miners, S32 is not exposed to iron ore. Instead offering a highly diversified portfolio of base metals and metallurgical coal (with most of these metals enjoying solid price strength). We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earningslinked dividend policy.
Morgans has an add rating and $5.40 price target on South32's shares.
