I’m feeling optimistic about the resources sector, and I’m keeping a close eye on Sirius Minerals PLC (LON:SXX) (SXX.L), Petrofac Limited (LON:PFC) (PFC.L), Hurricane Energy PLC (LON:HUR) (HUR.L), Tullow Oil plc (LON:TLW) (TLW.L) and Glencore PLC (LON:GLEN) (GLEN.L).
I think Petrofac Limited could have investment potential for the long run, but the company’s SFO investigation has made me feel somewhat uneasy about its outlook. I think there is a good underlying business still in place – as evidenced by some recent contract wins. But for now I think I’ll keep watching it until more news flow is released about Petrofac’s long term future.
This year has been markedly different for Sirius Minerals and Hurricane Energy. While the former has risen sharply, the latter has fallen heavily. I think both stocks have good strategies and long term growth potential, although I believe more volatility could be on the near term horizon for both shares.
Sirius Minerals has a growth opportunity in terms of world population growth in my eyes, while the potential for higher oil and gas prices keeps me interested in the outlook of Hurricane Energy.
I’m upbeat about Glencore and feel it is making the right changes to its business model. It has reduced debt, cut costs and is now set to deliver improving financial performance. Its strategy is similar to that now being pursued by Tullow Oil. It is cutting debt and is also seeking to increase production. This could be good for its cash flow and lead to a more sustainable growth outlook.
With neither Glencore nor Tullow Oil having demanding valuations at the moment, they are two resources stocks which I think could have investment appeal for the long run. Although they may be volatile in the near term, I think they have the right strategies to perform relatively well in future years.