ASX blue-chip shares are not my usual hunting ground. But three have recently caught my eye.
All are in the ASX 20, which represents the 20 largest Australian public listed companies by market capitalization.
Additionally, I think each could outperform the benchmark S&P/ASX 200 (ASX: XJO) for investors who have a long-time horizon (5-10 years).
Let’s check them out.
1. Telstra Corporation Ltd (ASX: TLS)
Telstra and growth have seldom been used in the same sentence for many years.
However, after reducing its cost base by $2.7 billion and removing four layers of management, Chief Executive Andy Penn has signalled just that.
The business is aiming for mid-single-digit EBITDA growth over the next four years.
With a fully franked dividend yield of 3.75%, Telstra isn’t going to light your world on fire.
But that dividend should be defensible now with growing earnings, and possibly even increase over time.
“…we will focus on maximising our franked dividend and seeking to grow it over time, investing for growth and returning excess cashflow to shareholders”.
2. Fortescue Metals Group Limited (ASX: FMG)
Fortescue Metals is the world’s fourth-largest iron producer and a significant carbon emitter.
Therefore, it’s somewhat ironic that it’s been making headlines for its climate change ambitions, specifically green hydrogen.
“The iron ore company I founded 18 years ago, Fortescue, generates just over two million tonnes of greenhouse gas – every year. Two million tonnes. That’s more than the entire emissions of Bhutan”
– Chairman Andrew “Twiggy” Forrest
The business will spend 10% of annual profits on clean energy projects, equal to $US400 million to $US600 million per year.
Markets get nervous when businesses make big strategic moves away from their core business.
But redirecting a proportion of earnings towards growing industries is sound capital management.
Execution remains a risk, but if anyone can pull it off it’s Twiggy and the band at Fortescue.
3. Commonwealth Bank of Australia (ASX: CBA)
If you ripped off the CommBank branding and asked someone who created this app? They’d probably answer a new fintech like Square (NYSE: SQ) or Afterpay Ltd (ASX: APT).
In fact, it’s CBA, a bank over 100 years old. It might sound cliche, but the CommBank app is more than just banking.
You can check your eligibility for a concession card. Get personalised shopping deals. Sign up for an energy or internet plan. Soon you’ll even be able to trade cryptocurrency.
It’s the first of its kind in Australia. But in mobile-first countries such as China, Singapore and Indonesia these all-encompassing apps are hugely popular.
CBA has a big headstart on its rival big four competitors and is taking it right up to local fintechs such as Up Bank and Pearler.
I expect this technology-led mindset to translate into facets of the business, and subsequently increase shareholder value over time.
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