Can BHP Billiton plc and Rio Tinto plc maintain their surge into 2017?

What a stunning year it has been for the big commodity players. The sector has shrugged off 2015’s annus horribilis and seen their share prices rebound sharply. Can investors expect more of the same in 2017?

Ton of fun

BHP Billiton (LSE: BLT) has more than doubled since the lows of mid-January, when its share price briefly touched 580p. Today it trades at 1346p, a rise of 132%. That is the partly due to an elastic-like snapping back after last year’s dramatic sell-off, which once again confirmed our Foolish philosophy that the best time to buy shares is often when everybody else is rushing to sell.

The astonishing thing is that BHP Billiton’s recovery is still showing some legs, with its share price up nearly 10% in the last month, although in this case we can partly thank President-elect Donald Trump and his $1trn reflation campaign pledge. Chinese sentiment has also revived, despite the country’s ever expanding property and credit bubble, and this has driven up the price of industrial metals such as coal, iron ore and copper.

Surprise oil play

BHP Billiton is also a sizeable oil producer in its own right, and has benefited from positive sentiment in the run-up to tomorrow’s OPEC meeting. However, there is a danger that these hopes could be dashed, with Saudi Arabia’s energy minister now apparently downplaying the importance of cutting a deal.

The company has enjoyed strong tailwinds but they just as soon start blowing in a more challenging direction. BHP Billiton’s rather pricey valuation of 74 times earnings would normally scare the life out of me, but forecast earnings per share growth of 286% in the year to 30 June 2017 should reduce that to saner levels. I would approach with caution as recent momentum cannot continue forever, but then I said that six months ago.

Rio shows Brio

Rio Tinto (LSE: RIO) has shown similar vigour this year, its share price roughly doubling from 1577p to 3114p since the dark days of January. Again, it keeps climbing, up roughly 12% in the last month alone, due to Trump and China.

The miners also deserve much of the credit for this year’s commodity stock recovery, having worked hard to slash costs, dispose of non-core assets and boost productivity.  Yes, all of these were forced on them by events, but they have delivered with gusto.

I’m alright, Jacques

Chief executive Jean-Sébastien Jacques reckons Rio Tinto can boost cash flow by $5m over the next five years via a new productivity drive, on top of next year’s $2bn cost-cutting target. He is now aiming to prioritise “value over volume”, something I have wanted the miners to do for some time as I was never convinced by their attempts to offset falling commodity prices by ramping up production. Jacques even told investors he was prepared to cut iron ore output if it would improve cashflow.

Rio Tinto is no longer cheap, trading at 15.6 times earnings, and the yield is forecast to fall to 3% from today’s 5.5%. Forecast EPS growth of a healthy 19% in 2017 suggests it could have further to go next year. Let’s just hope the macro fundamentals hold, especially in China.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.