Why ASX oil stocks could replace the ASX tech boom in 2021

You might think it's a bid of a bold call, but some experts believe ASX oil-exposed stocks could replace the ASX tech boom of 2020.

boom in technology shares represented by race track strating line printed with the words 'are you ready'

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

You might think it's a bid of a bold call, but some experts believe ASX oil-exposed stocks could be the next ASX tech stars.

While its tech stocks like the rocketing Afterpay Ltd (ASX: APT) share price and Xero Limited (ASX: XRO) share price that have been soundly beating the S&P/ASX 200 Index (Index:^AXJO), oil stocks may replace the tech rally in 2021.

ASX energy stocks have underperformed this year as the oil price crashed. Many are also shunning the sector due to environmental concerns.

ESG investing clashes with ASX energy stocks

The snub that Prime Minister Scott Morrison had to endure at the UN Climate Summit will motivate even more investors to embrace Environmental, Social, and Corporate Governance (ESG) investing.

Even the big banks are getting in on the act with Australia and New Zealand Banking GrpLtd (ASX: ANZ) recently promising not to fund any fossil fuel projects. This coming from an industry that isn't known to have a conscience!

Meanwhile, several high-profile global fund managers, including BlackRock, Inc. (NYSE: BLK), are moving away from investing in carbon polluting companies.

Why ASX energy stocks could replace the tech boom

But some experts believe there are undervalued investments in the energy sector, even for ESG conscious investors, reported the Australian Financial Review.

"Oil is still a big part of the index, industrials is still a big part, materials, chemicals, steel, all these things," the AFR quoted Janus Henderson portfolio manager, Tom O'Hara.  

"You're going to have to start owning these things in order to protect your portfolio and deliver performance."

How to pick the best ASX energy stocks for 2021

The point he was making is that one shouldn't paint all energy stocks with the same brush. To do so means missing out on ASX stocks that can deliver outsized returns in 2021.

So how can ESG investors have their cake and eat it? The key here is to look for stocks that are transitioning to a cleaner future or those that are developing lower carbon projects.

European oil and gas giants are moving with the times and bolstering their green credentials. Examples are the Royal Dutch Shell Plc (LON: RDSA) share price, the BP plc (LON: BP) share price and Total SE (EPA: FP) share price.

There are two ASX stocks that also stand out in this regard, reported the AFR. These are the Santos Ltd (ASX: STO) share price and Woodside Petroleum Limited (ASX: WPL) share price.

Where value investing meets ESG

Both stocks enjoyed a robust bounce in November as the oil price recovered from the COVID‐19 meltdown. But the WPL share price is still nursing a 33% loss and the STO share price an 18% loss since the start of 2020.

This leaves them plenty of room to rally. Thrown in the fact that there's a limited pool of ESG friendly ASX energy stocks to pick from, chief investment officer at Bell Asset Management, Ned Bell, told the AFR he thinks there could be a scramble in 2021 to snap up such stocks.

Should you invest $1,000 in Australia And New Zealand Banking Group right now?

Before you buy Australia And New Zealand Banking Group shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Australia And New Zealand Banking Group wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Brendon Lau owns shares of Australia & New Zealand Banking Group Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Excited couple celebrating success while looking at smartphone.
Broker Notes

Bell Potter names the best ASX 200 stocks to buy in May

The broker is feeling bullish on these names this month. Let's find out why.

Read more »

Red buy button on an apple keyboard with a finger on it representing asx tech shares to buy today
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
Opinions

Investing in high-yield ASX stocks has two major negatives

High-yield stocks do have downsides.

Read more »

Person pretends to types on laptop drawn in sand.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a happy finish to the week for ASX shares this Friday.

Read more »

Three people in a corporate office pour over a tablet, ready to invest.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A mature age woman with a groovy short haircut and glasses, sits at her computer, pen in hand thinking about information she is seeing on the screen.
Share Market News

ASX shares in April: 8 key takeaways according to Macquarie

Here are eight key takeaways from April, according to a new note from the broker.

Read more »

Woman looking at a phone with stock market bars in the background.
Share Market News

Market outlook: Should I 'sell in May and go away'?

May is the time to sell... If you believe in fairytales.

Read more »

Five young people sit in a row having fun and interacting with their mobile phones.
Share Gainers

5 ASX All Ords stocks rocketing higher this week

Investors sent these five ASX All Ords stocks soaring this week. But why?

Read more »