"HALO trading: A flash in the pan or an unstoppable trend?"

```

Since the beginning of this year, an investment theme called “HALO trading” has been quietly heating up on Wall Street.

According to the British Financial Times, the concept was proposed by Josh Brown, CEO of New York’s Ritholtz Wealth Management, standing for Heavy Assets, Low Obsolescence.

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

What are HALO companies?

HALO companies share a common trait: owning large amounts of fixed physical assets, which form insurmountable barriers to entry.

Typical examples include: utilities (such as Italy’s Enel), mining (such as Rio Tinto), energy (such as Shell), and chip manufacturers—TSMC’s annual capital expenditure has reached $32 billion since 2020.

Goldman Sachs European strategist Guillaume Jaisson gave quantitative standards in his research: the proportion of fixed assets to total assets, tangible assets per employee, and the ratio of capital expenditure to sales—the higher the score, the stronger the "HALO" traits.

In contrast, typical “non-HALO” victims include: SaaS software companies, whose code can be quickly copied by AI; real estate platform Rightmove’s share price dropped 25% late last year; financial planner advice can be directly scraped by AI from the Internet—these sectors have all suffered sell-offs over the past year.

Heavy asset sectors outperform the market this year

Market performance has already proven this logic.

In the MSCI global price index, utilities, mining, and energy sectors have all outperformed the broad-based index this year—and this excess performance appeared even before the outbreak of the Iran war and the oil price surge in March.

South Korea’s Doosan Group is an extreme case. The engineering group, which builds desalination plants, saw its dollar-denominated share price rise over 70% this year.

By contrast, cloud computing hyperscalers—once seen as AI beneficiaries—have diverged. According to JPMorgan data, from ChatGPT’s launch in 2022 through 2025, hyperscale cloud providers like Amazon, Google, Meta, Oracle have committed a combined capital expenditure of $1.3 trillion.

But the market isn’t buying it. Concerns over potential overcapacity in data centers have dragged Oracle and Microsoft’s share prices down more than the broad market, and more than their tech peers.

Valuation discount narrowing, how much further can the theme go?

This is now investors' main concern.

A year ago, European HALO stocks had a 35% P/E ratio discount compared to asset-light companies. According to Goldman Sachs’ Jaisson, this discount has basically disappeared.

Yet Jaisson remains optimistic. He believes profit growth will be the next stage’s driver: “The gap in earnings growth per share is widening, HALO stocks delivered strong results in the latest earnings season. The market is shifting focus to Q1 earnings, early signs are positive, improved corporate guidance is pushing up consensus forecasts.”

However, not everyone agrees. Patrick Kaser of Brandywine Global says: “I generally agree with the HALO logic, but at the current moment, I don’t think it’s an attractive risk/reward investment theme.”

A deeper narrative: de-Americanization and ‘scarcity’

There is a more macro logic behind HALO.

Julien Albertini, manager of the $72 billion First Eagle Global Value Fund, believes the US stock market no longer provides “effective exposure to the real economy”. He notes that the proportion of US corporate investment expenditure to cash flow has dropped from 65%-70% in the early 1990s to below 40% this decade.

“This is the end of ‘Pax Americana’,” says Albertini, “Europe now needs strategic autonomy—energy security, defense, supply chain resilience. This affects inflation, fiscal deficits, and thus stock portfolio selection.”

For him, the core question is “scarcity”: does the company have products or services that others don’t?

Sebastian Raedler, Head of European Equity Strategy at Bank of America, approaches from another angle. He warns that as “Agentic AI” spreads rapidly in China—AI robots completing searches, buying, and consumption behavior automatically—Western economies may face a similar overcapacity dilemma, ultimately shrinking consumer demand.

“Trade surplus means ‘free riding’ on other countries’ final demand,” says Raedler, “This is exactly where the HALO theme fits—the market needs business models with shorter terminal value horizons.” In other words, companies able to generate profits soon, not dependent on far-away future earnings promises.

New factor, or old wine in new bottles?

Some liken HALO to the “new economy vs. old economy” narrative of the 1990s tech bubble—when value stocks were trampled by growth stocks, but now the roles have switched.

Brown disagrees. He emphasizes HALO isn’t simply an “old economy comeback,” since the theme also covers high-intensity investment tech companies like semiconductors.

His insight is direct: “I think this marks the birth of a new investment factor in the AI era. Investors must consider a company’s ‘HALO degree’ before buying.”

Alec Cutler, manager of Orbis Global Balanced Fund, adds a geopolitical perspective: he favors companies reflecting the trend of “fundamental needs and global shifting toward national interests,” namely energy, utilities, and heavy industry—rather than luxury, which also suffered heavy losses over the past year.

First Eagle’s Albertini sees a chance for active management: “We’re seeing broader differentiation between sectors and regions, which is very exciting for active fund managers.”

The Financial Times sums up that, for investors to accept HALO long-term, two conditions must be met:

First, individual stock valuations must not be seriously out of line with profit growth; second, threats of AI disruption must keep suppressing companies that lack heavy asset ‘moats’.

Ultimately, over the past year, stock investors have actively sought undervalued opportunities in the market—regardless of the “HALO” label. This shift from an AI-driven unilateral bull market to multi-directional rotations is itself a signal.

Risk Warning and DisclaimerThe market has risks, investment needs caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial circumstances, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article fit their particular situation. Invest accordingly, at your own risk. ```