2 blue-chip ASX stocks more compelling than market expected

I believe there are a few blue chip ASX stocks that have better futures than the market is giving.

Every company on the ASX (and other global exchanges) has a stock price. This stock price contains expectations – future profit margins, potential revenue growth, market share, potential dividends, etc.

One way to beat the overall market return is to find potential investments that the market seems to be undervaluing. In my mind, these two blue chip ASX stocks have a compelling future:

Telstra Company Ltd. (ASX:TLS)

Everyone knows Telstra, Australia’s leading telecommunications company.

Its disappearance from profitability has been well publicized in recent years. Basically, NBN customers are bringing in far less profit than before when they were customers of Telstra’s own broadband network.

However, I think the market is underestimating how much stronger Telstra’s margins can get in the future as more homes switch to 5G-powered home broadband. This could mean faster speeds for customers, but also a much better profit margin for Telstra, as the NBN won’t receive a significant share of the profits.

On top of that, I like the diversification games that Telstra has going on – energy, international telecommunications and healthcare, for example. I think these are good plays to diversify and increase profits for the blue chip ASX share.

As a bonus, remember that Telstra continues to pay out a strong dividend.

Fortescue Metals Group Limited (ASX: FMG)

First, let me say that I think Fortescue stock price may be a bit pricey at over $21.50 with the current price of iron ore.

However, in the longer term, I think Fortescue’s green efforts with Fortescue Future Industries (FFI) could prove very useful for the company. This will reduce dependence on Chinese who buy a lot of iron.

But also, FFI works in an area with very strong growth. If the world is to meet the emission reduction targets discussed, trillions of dollars may need to be allocated to green initiatives.

Fortescue has a whole list of projects he’s been working on. The acquisition of Williams Advanced Engineering (WAE) instantly makes FFI a player in the world of batteries, in addition to bringing tangible revenues to the division. What excites me the most is the FFI project to produce large quantities of green hydrogen. It already has a customer – E.ON – for a third of its renewable hydrogen production by 2030. Given the skyrocketing price of lithium and the lack of electric vehicle infrastructure around the world, I think green hydrogen has the potential to challenge vehicle batteries and other areas that need energy.

If/when the price of iron ore falls below US$100 per ton, I will be interested in considering more Fortescue stock. The green zones are looking very positive for the blue chip ASX stock. .

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