Morgans names the best ASX resources shares to buy in February

At the start of each month, the team at Morgans picks out its best ideas for investors. These are the ASX shares that it believes offer the highest risk-adjusted returns over a 12-month timeframe and are supported by a higher-than-average level of confidence.

Yesterday we looked at financial shares that have made the list this month. You can read about them here. Whereas on this occasion we’ll take a look at the resources sector. Here are the picks:

BHP Group Ltd (ASX: BHP)

This mining giant has made the broker’s list. It currently has an add rating and $48.60 price target on its shares.

The broker believes BHP is a “relatively low risk given its superior diversification relative to its major global mining peers.” In addition to this, its analysts like BHP due to its “attractive combination of upside sensitivity, balance sheet strength and resilient dividend profile.”

Newcrest Mining Ltd (ASX: NCM)

If you’re looking for exposure to the gold sector then Newcrest could be the share to buy according to Morgans. It has an add rating and $26.05 price target on its shares.

Morgans believes it could be a good option for investors “looking for gold exposure without development risk.” It also likes the company’s geographic spread, which it expects to provide “some relief from the cost and labour challenges WA focussed companies are currently feeling.”

Santos Ltd (ASX: STO)

Another option in the resources sector to consider is this leading energy producer. Morgans has an add rating and $9.15 price target on its shares.

The broker likes Santos due to the resilience of its growth profile and diversified earnings base, which it believes puts the company in a position “to outperform against a backdrop of a continuing broader sector recovery.”

South32 Ltd (ASX: S32)

Another resources share that makes Morgans’ best ideas list is South32. The broker has an add rating and $5.00 price target on the mining giant’s shares.

It commented: “We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earnings-linked dividend policy.”

Woodside Petroleum Limited (ASX:WPL)

Finally, Morgans is positive on this energy producer and currently has an add rating and $30.55 price target on its shares. It is a fan of its “transformative” merger with the petroleum assets of BHP and believes it is getting the better end of the deal.

Morgans explained: “We think WPL is clearly getting the better of the deal, with synergies not baked into deal metrics and BHP willing to accept a discount. The deal is transformative, lifting WPL into being a top 10 global E&P with +2 billion barrels of 2P reserves, with EBITDA of US$4.7bnpa and growth options.”

The post Morgans names the best ASX resources shares to buy in February appeared first on The Motley Fool Australia.

More reading

• Own ASX 200 energy shares? Here’s what OPEC’s been up to
• What rising inflation could mean for Newcrest (ASX:NCM) shares
• Here’s why the BHP (ASX:BHP) share price is rebounding in 2022
• 5 things to watch on the ASX 200 on Thursday
• These 3 ASX 200 shares are topping the volume charts on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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