"HALO Trades": A Fleeting Fad or the New Normal?

This year, an investment theme known as the "HALO trade" has quietly gained traction on Wall Street.

According to a report by the UK's Financial Times, this concept was proposed by Josh Brown, CEO of New York-based Ritholtz Wealth Management. Its full name is Heavy Assets, Low Obsolescence—referred to as HALO.

The core logic is straightforward: AI can replace programmers, analysts, and even entire software systems, but it cannot replace a refinery, a transmission grid, or a copper mine.

What Are HALO Companies?

HALO companies share common characteristics: they possess vast amounts of fixed physical assets, creating formidable barriers to entry.

Typical examples include: electric utilities (such as Italy's Enel), mining firms (like Rio Tinto), energy giants (such as Shell), and chip manufacturers—TSMC has averaged $32 billion in annual capital expenditures since 2020.

Guillaume Jaisson, a European strategist at Goldman Sachs, provided quantitative criteria in a research report: the ratio of fixed assets to total assets, tangible assets per employee, and capital expenditure relative to sales. The higher these scores, the stronger the "HALO" attribute.

In contrast are typical victims of "non-HALO" dynamics: SaaS software companies whose code can be rapidly replicated by AI; real estate platform Rightmove, which saw its stock price drop by 25% late last year; and financial planners whose advice can be directly scraped from the internet by AI—all these sectors have faced selling pressure over the past year.

Heavy Asset Sectors Outperform the Market This Year

Market performance is already validating this logic.

In the MSCI Global Price Index, utility, mining, and energy sectors have outperformed broad market benchmarks this year—and this excess return appeared well before the outbreak of the Iran war in March and the subsequent surge in oil prices.

South Korea's Doosan Group presents an extreme case. This engineering firm, which builds desalination plants, saw its stock price rise by more than 70% in dollar terms this year.

By comparison, hyperscale cloud companies once hailed as beneficiaries of AI have experienced divergence. According to JPMorgan data, from the release of ChatGPT in 2022 through 2025, major cloud providers including Amazon, Google, Meta, and Oracle have collectively pledged capital expenditures totaling $1.3 trillion.

Yet the market remains skeptical. Concerns about potential oversupply in data centers have dragged down the stock prices of Oracle and Microsoft, causing them to fall more than the broader market and their tech peers this year.

Valuation Discounts Narrowing: How Far Can This Theme Go?

This is the question currently top of mind for investors.

A year ago, European HALO stocks traded at a 35% discount in price-to-earnings multiples compared to light-asset companies. According to Goldman Sachs' Jaisson, this discount has now largely disappeared.

But Jaisson remains optimistic. He believes earnings growth will drive the next phase: "The gap in earnings-per-share growth continues to widen, and HALO stocks delivered strong results in the latest earnings season. Market focus is shifting to Q1 earnings, early signs are positive, and improved corporate guidance is driving upward revisions in consensus estimates."

However, not everyone agrees. Patrick Kaser of Brandywine Global stated: "I broadly agree with the HALO logic, but at this point in time, I believe it is no longer an investable theme with an attractive risk-reward profile."

Deeper Narratives: Deglobalization and "Scarcity"

Behind the HALO theme lies an even broader macroeconomic narrative.

Julien Albertini, portfolio manager of the First Eagle Global Value Fund with $72 billion in assets under management, argues that U.S. equities no longer provide "effective exposure to the real economy." He notes that corporate investment spending as a percentage of cash flow has fallen from 65%-70% in the early 1990s to below 40% this decade.

"This marks the end of 'Pax Americana,'" Albertini said. "Europe now needs strategic autonomy—energy security, defense, supply chain resilience. This affects inflation, fiscal deficits, and ultimately influences equity portfolio selection."

For him, the core issue is "scarcity": Does the company offer products or services that others do not?

Sebastian Raedler, head of European equity strategy at Bank of America, approaches the issue from another angle. He warns that as "agentic AI" rapidly spreads in China—where AI robots automatically perform searches, purchases, and other consumer behaviors—Western economies may face a similar oversupply dilemma, ultimately leading to a contraction in consumer demand.

"Trade surpluses mean 'free-riding' on other nations' final demand," Raedler said. "This is precisely where the HALO theme comes into play—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 profit promises.

A New Factor or Old Wine in a New Bottle?

Some have likened HALO to the "New Economy vs. Old Economy" narrative of the 1990s tech bubble—when value stocks were trampled by growth stocks, and now the roles have reversed.

Brown disagrees. He emphasizes that HALO is not simply a "return to old economy," as the theme also includes technology companies with sustained high-intensity investment, such as semiconductor firms.

His assessment is more definitive: "I believe this represents the birth of a new investment factor in the AI era. Before buying a company, investors must consider how 'HALO' it is."

Alec Cutler, portfolio manager of Orbis Global Balanced Fund, adds a geopolitical perspective: he favors companies reflecting the trend of "fundamental demand and global shift toward national interests," specifically pointing to energy, utilities, and heavy industry—rather than the luxury sector, which also suffered heavily over the past year.

Albertini of First Eagle sees opportunities for active management: "We are seeing broader differentiation across sectors and regions, which is very exciting for active fund managers."

The Financial Times concludes that, in the long run, investor acceptance of the HALO theme requires two conditions:

First, individual stock valuations must not diverge significantly from earnings growth; second, the threat of AI disruption must continue to suppress companies lacking heavy-asset "moats."

Ultimately, over the past year, stock investors have been actively seeking undervalued opportunities in the market—whether or not they carry the "HALO" label. This shift from an AI-driven one-way bull market to diversified rotation itself serves as a signal.

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