An investment theme known as "HALO trading" has been gaining quiet momentum on Wall Street this year. The concept, introduced by Josh Brown, CEO of New York-based Ritholtz Wealth Management, stands for Heavy Assets, Low Obsolescence. Its core logic is straightforward: while artificial intelligence can replace programmers, analysts, and even entire software systems, it cannot replace a refinery, a power grid, or a copper mine.
What defines a HALO company? These firms share common traits: they possess substantial fixed physical assets that create significant barriers to entry for competitors. Typical examples include power utilities like Italy's Enel, mining giants such as Rio Tinto, energy majors like Shell, and chip manufacturers—notably Halozyme Therapeutics, which has maintained an average annual capital expenditure of $32 billion since 2020.
Goldman Sachs European strategist Guillaume Jaisson has proposed quantitative criteria to identify HALO companies, focusing on the ratio of fixed assets to total assets, tangible assets per employee, and capital expenditure relative to sales. Companies scoring higher on these metrics exhibit stronger HALO characteristics. In contrast, typical non-HALO victims include SaaS software firms, whose code can be rapidly replicated by AI. Property platform Rightmove saw its shares fall 25% late last year, and financial planners face competition from AI-generated advice sourced directly from the internet—industries that have all experienced sell-offs over the past year.
Heavy-asset sectors have outperformed the broader market this year, validating this investment thesis. Within the MSCI World Price Index, utilities, mining, and energy sectors have all exceeded the performance of broad market indices—a trend that emerged even before the spike in oil prices following geopolitical tensions in March. An extreme case is South Korea's Doosan Group, an engineering conglomerate that builds desalination plants, whose stock price has surged over 70% in dollar terms this year.
Conversely, hyperscale cloud computing companies, once seen as AI beneficiaries, have shown mixed results. According to J.P. Morgan data, from ChatGPT's launch in 2022 through 2025, major cloud providers including Amazon, Google, Meta, and Oracle have collectively committed to $1.3 trillion in capital expenditures. However, market skepticism about potential data center overcapacity has weighed on stocks like Oracle and Microsoft, which have underperformed both the broader market and their tech peers this year.
The key question for investors now is how much further the HALO theme can run. A year ago, European HALO stocks traded at a 35% price-to-earnings discount compared to capital-light companies. According to Jaisson, this discount has now largely disappeared. Yet he remains optimistic, pointing to earnings growth as the next driver: "The gap in EPS growth continues to widen, with HALO stocks delivering strong results in the latest earnings season. Market focus is shifting to first-quarter earnings, and early signs are positive, with improved corporate guidance lifting consensus estimates."
Not all share this view. Patrick Kaser of Brandywine Global stated, "While I generally agree with the HALO logic, at this point I no longer see it as an investable theme with attractive risk-reward prospects."
A deeper narrative underpinning the HALO theme involves deglobalization and scarcity. Julien Albertini, portfolio manager of the $72 billion First Eagle Global Value Fund, argues that U.S. equities no longer offer "effective exposure to the real economy." He notes that the proportion of corporate investment spending relative to cash flow has fallen from 65%-70% in the early 1990s to below 40% this decade. "This marks the end of the Pax Americana," Albertini said. "Europe now needs strategic autonomy—energy security, defense, supply chain resilience. This impacts inflation, fiscal deficits, and ultimately, equity portfolio choices." For him, the core question is scarcity: Does the company offer a product or service that others cannot replicate?
Sebastian Raedler, head of European equity strategy at Bank of America, offers a different perspective. He warns that as "agentic AI"—where AI bots autonomously perform tasks like searching and purchasing—gains traction in China, Western economies could face overcapacity challenges similar to China's, ultimately leading to weaker consumer demand. "Trade surpluses imply free-riding on others’ final demand," Raedler explained. "This is where the HALO theme becomes relevant—the market needs business models with shorter terminal value horizons." In other words, companies that generate profits in the near term, rather than relying on distant future earnings promises.
Some compare HALO to the "new economy vs. old economy" narrative of the 1990s tech bubble, when value stocks were overshadowed by growth stocks—a dynamic that has now reversed. Brown disagrees, emphasizing that HALO is not merely a "return of the old economy," as it includes technology firms like semiconductors that require sustained heavy investment. He offers a clearer verdict: "I believe this marks the birth of a new investment factor in the AI era. Investors must now consider a company’s 'HALO score' before buying."
Alec Cutler, portfolio manager of the Orbis Global Balanced Fund, adds a geopolitical angle: he favors companies aligned with "fundamental needs and the global shift toward national interests," specifically pointing to energy, utilities, and heavy industry—rather than luxury goods, which have also suffered over the past year.
Albertini of First Eagle sees an opportunity for active management: "We are observing broader dispersion across sectors and regions, which is very exciting for active fund managers."
In the long run, widespread investor adoption of the HALO theme depends on two conditions: first, stock valuations must not diverge significantly from earnings growth; second, the threat of AI disruption must continue to weigh on companies lacking heavy-asset "moats." Ultimately, over the past year, equity investors have actively sought undervalued opportunities—whether labeled "HALO" or not. This shift from an AI-driven bull market to broader sector rotation is itself a significant signal.
Comments