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The next battle facing these ASX stocks will come from within

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The profit reporting run has barely begun but ASX coal and energy stocks are already facing a new challenge in the upcoming AGM season.

A group of more than 100 shareholders in Whitehaven Coal Ltd (ASX: WHC) have filed a resolution to get the miner to shutter its business, reported the Australian Broadcasting Corporation (ABC).

The group, which is led by activist shareholder Market Forces, will put the question to Whitehaven shareholders at the miner’s next annual general meeting.

It wants management to close down its operations and return the capital to shareholders.

Resolution for revolution

The Whitehaven share price is already under considerable pressure from the COVID-19 fallout and is trading close to a four-year low.

While no one expects the resolution to pass with a majority vote (not even Market Forces), it doesn’t have to to get the desired effect.

By persistently putting the question of climate change in front of the company, management will have to think more deeply about this issue.

Threat to coal assets

Activist shareholders argue that there is a risk that Whitehaven’s assets will be worth little as “stranded assets”. These are assets that no one wants as the world moves away from fossil fuel.

Whitehaven dismisses the risk and have pointed out that their coal is primarily used in steel production.

Australia must love steel as we’ve built the country on the back of iron ore exports like the likes of Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP).

Coal indispensable to iron ore?

You need carbon to make steel and the carbon comes from coal. But some experts point out that there are available technologies to manufacture steel without coal.

The debate over the risk of stranded assets wont’ be settled at Whitehaven’s AGM. But this won’t stop Market Forces from lodging similar motions with New Hope Corporation Limited (ASX: NHC), Beach Energy Ltd (ASX: BPT) and Cooper Energy Ltd. (ASX: COE).

New Hope is a coal miner, while the other two are oil and gas companies.

Fossil fuel risks growing

Activist shareholders are unlikely to stop with there. They are plotting their move on the industry titans like Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO).

ASX energy companies are already under pressure from the global recession triggered by COVID-19. Demand for oil have plunged due to the partial shutdown of major economies to control the outbreak.

This is forcing energy giants to announce large asset write downs. These aren’t quite stranded assets just yet, but it’s hard to see what can break the industry out of the entrenched downtrend.

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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