Considering the strength of the global economy and its positive future growth forecasts, I believe resources shares could be in a position to outperform again in 2018.
This could make it worth considering adding a little diversification to your portfolio in the form of one or two resources shares.
In light of this, are these resources shares the ones to buy?
BHP Billiton Limited (ASX: BHP)
I believe that the aforementioned tailwinds and increasing commodity prices could lead to BHP Billiton outperforming the market for the next two to three years. I think that this could make the miner a great addition to a balanced portfolio, especially with its generous fully franked dividend. At present BHP Billiton's shares provide a trailing 3.6% yield, but I believe this will grow significantly in FY 2018. Especially if it is able to offload its U.S. shale assets in the near future. I suspect the funds raised could be used for a buyback or even a special dividend. As a result, I would pick it ahead of rival Rio Tinto Limited (ASX: RIO) at this point.
Santos Ltd (ASX: STO)
Rising oil prices and takeover rumours have been big drivers in this energy company's strong share price gain over the last 12 months. During this time Santos' shares have risen a remarkable 32%, vastly outperforming the market average. However, unless oil prices were to rise notably higher from here, I think that Santos ought to be classed as fully valued now. Especially considering that production is only expected to be in the range of 55-60 mmboe in FY 2018, compared to 59.5 mmboe in FY 2017. However, if the Santos share price were to retreat to in or around the $4.50 level, I would be a buyer again. Until then I would gain exposure to rising oil prices through an investment in BHP Billiton.
