Over the last 12 months the resources sector was once again a great place to invest. A number of shares in the sector recorded market-beating gains and returned significant funds to their shareholders.
I expect more of the same in 2020, which could make it worth considering a little exposure to the sector.
But which resources shares should you buy? Here are three that I would buy:
BHP Group Ltd (ASX: BHP)
My favourite option in the resources sector continues to be BHP. This is due to the mining giant's portfolio containing some of the best assets in the world. These assets have been generating significant free cash flow for BHP, with the majority of it being returned to shareholders through dividends and buybacks. And with the trade war appearing to have been averted, I expect more of the same in FY 2020. Another bonus is its generous fully franked dividend yield.
Rio Tinto Limited (ASX: RIO)
Rio Tinto also owns a number of world class assets across several different commodities. This allowed the miner to generate strong free cash flow again in 2019. And like BHP, it has returned the majority of it to shareholders. If iron ore prices remain favourable in the near term, I suspect the miner will be in a position to reward shareholders with generous dividends again in 2020. This could make it worth considering if you want exposure to the sector.
St Barbara Ltd (ASX: SBM)
If you want some exposure to gold in your portfolio then my pick in the industry is St Barbara. This is due to its attractive valuation after a sizeable pullback in its share price in 2019 due to production issues. I expect this to be only temporary and for production to improve greatly over the coming years. Especially following the acquisition of the very promising Atlantic Gold business. I'm not the only one that is positive on St Barbara. A note out of Goldman Sachs towards the end of 2019 revealed that it has the gold miner on its conviction buy list with a $4.00 price target.
