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.
