Amid dual pressures from geopolitical tensions and fears of AI-driven disruption, growth stocks with "light asset" structures have recently fallen out of favor, while "HALO assets" are attracting strong capital inflows. Sectors such as resources, railways, ports, transportation, machinery equipment, and utilities have shown notable strength. The term "HALO assets," an acronym for "Heavy Asset, Low Obsolescence," refers to corporate assets characterized by substantial physical infrastructure and low rates of obsolescence. This concept was first introduced by Josh Brown of investment firm Ritholtz in early February 2026 and has since been widely adopted by Wall Street institutions like Morgan Stanley and Goldman Sachs.
In fact, HALO assets have long been key targets for value investing. The remarkable "2000-fold return over 20 years" achieved by A-share value investing veteran Zhang Yao stems from this very logic. Companies such as China Shenhua, Shaanxi Coal Industry, SDIC Power, and CNOOC are prime examples of HALO assets. Similarly, Warren Buffett’s holdings in oil, power, and railway companies have long reflected this approach. Many resource giants, such as ExxonMobil, which traces its origins back to 1920, have endured for over a century, weathering various economic cycles and major events while continuing to reach new stock price highs.
For investors, heavy-asset companies in low-competition sectors may not offer explosive growth, but they possess two key characteristics: clarity and predictability. This makes them suitable for heavy allocation, particularly when acquired at deeply undervalued prices during market downturns. Strategic positioning, as demonstrated by Zhang Yao, can even lead to extraordinary investment outcomes. However, treating HALO assets as high-growth "theme" investments and buying them at elevated valuations will likely result in years of underperformance as valuation bubbles deflate. These assets are not momentum plays; investing in them requires extreme patience, with a focus on valuation and shareholder returns.
Growing dual anxieties are intensifying. Geopolitical tensions and the rise of unilateralism have led to unprecedented emphasis on national resources, key production capacities, and infrastructure. In an era of geopolitical instability and deglobalization, the criteria for assessing major economies have undergone profound changes. During the globalization era, metrics such as GDP per capita, corporate profits, and consumption levels were key indicators of national strength. However, in today’s climate of increasing conflict, self-sufficiency in technology, economic resilience, industrial scale, and key production capabilities are gaining greater attention.
Heavy-asset companies form the backbone of a nation’s economy, impacting both national welfare and livelihoods. The perception that geopolitical tensions and deglobalization may persist long-term has led capital markets to reassess the value of these companies. At the same time, the rapid advancement of AI has sparked anxiety among tech giants about potential disruption, leading to increased investor interest in hard-asset companies as a counter-AI bet.
Kevin Kelly, often referred to as the "oracle of the internet," noted in his new book "The Next 5000 Days" that throughout the history of disruptive technologies, dominant players in one era have never maintained their leadership in the next. For instance, many companies tried to compete with IBM in computer manufacturing but failed. An industry joke even circulated: "Those who defy IBM shall not succeed." Yet, almost overnight, IBM itself was dethroned as the computer era shifted from hardware to software, allowing companies proficient in software development, like Microsoft with its Windows operating system, to take the lead.
The cycle continued as numerous software companies attempted to challenge Microsoft with rival operating systems, only to fail repeatedly. So, who eventually displaced Microsoft? The new leader was Google, a search engine company that carved out a new domain rather than competing directly in operating systems. Later, attempts to rival Google in search also failed, and the next dominant force emerged: Facebook in social media. Today, thousands of companies compete with Facebook in social media, yet few succeed. The next winner, Kelly suggests, will likely be an augmented reality (AR) company. He argues that while industry leaders from IBM to Microsoft, Google, and Facebook may strive to lead in the AR era, history shows that no company can maintain dominance across technological shifts, as their past success often becomes their greatest constraint.
HALO assets have always been present. Valued for their simplicity, low valuations, high dividends, strong cash flows, and sustainability, they appeal to value investors. While they may lack explosive growth potential, they offer a high degree of certainty, allowing investors to commit significant capital with confidence. The key to successful investing is avoiding major losses, enabling compound interest to work over the long term. Under conditions of reasonable valuation and strong shareholder culture, HALO assets represent a "floor-supported" investment.
Over the past decade, HALO assets may have seemed unremarkable and far from market trends, yet their performance has been impressive. China Shenhua rose sixfold, while Shaanxi Coal Industry surged 8.7 times—gains comparable to those of internet and tech stocks. Yangtze Power and SDIC Power both more than doubled, delivering annualized returns exceeding 10%. Machinery equipment firms like Anhui Heli and CSI Sawing saw gains of around three times over ten years, and basic chemical company Zhengdan Co. more than doubled. Earnings growth has been the primary driver. For example, Guangdong Expressway’s net profit attributable to shareholders grew from 319 million yuan in 2014 to 1.562 billion yuan in 2024, a nearly fourfold increase. Shenergy Co. saw its net profit rise from 2.061 billion yuan to 3.944 billion yuan over the same period, nearly doubling.
Currently, many HALO assets in the A-share market offer dividend yields above 3% and trade at valuations below 20 times earnings. Investing in HALO assets requires strict attention to valuation and shareholder return culture. Overvalued HALO assets can take many years to justify their prices, as investors who bought PetroChina at over 40 yuan in 2007 learned the hard way. Additionally, companies lacking a shareholder return culture may fail to distribute profits effectively, even if they are highly profitable. Dividends are crucial; dividend yield not only reflects cash flow quality but also indicates a company’s commitment to shareholder returns.
Globally, sentiment toward HALO trades remains strong. The premium for pure "light-asset growth narratives" is being systematically compressed. In contrast, traditional industry leaders with high physical barriers, substantial tangible assets (such as upstream resources, key production capacity, and infrastructure), and robust cash flows are being repositioned as "ultimate safe havens" against inflation and technological disruption, attracting strategic overweight allocations from global capital.
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