Investors are increasingly focusing on companies less likely to be disrupted by artificial intelligence (AI) as concerns about the technology’s impact grow. This strategy, known as the HALO trade—short for "heavy assets, low obsolescence"—was introduced by Josh Brown, CEO of Ritholtz Wealth Management, earlier this year. As AI continues to evolve, Brown emphasizes a shift towards investing in firms that possess significant physical assets, which are deemed more resilient against technological disruption.
Both Goldman Sachs and Morgan Stanley have adopted HALO in their investment frameworks, noting positive performance among HALO stocks. Notable examples include FedEx and ExxonMobil, both of which have surged nearly 30% since the beginning of the year, while Coca-Cola has increased by approximately 17%.
According to Dave Mazza, CEO of Roundhill Investments, HALO companies typically require substantial physical assets to generate revenue and maintain durability. He argues that while AI may alter processes, it cannot eliminate the need for work in sectors like electricity supply and goods production. Roundhill recently launched the Roundhill Halo ETF (LOHA) to track projects that highlight companies with inherent physical focuses, including those from the industrials, transportation, and mining sectors.
Brown asserts that this approach isn’t anti-AI but rather a proactive strategy for long-term investment in a transforming landscape. He notes that the HALO strategy represents a counterpoint to the declining fortunes of heavily software-dependent firms, which have seen significant stock price drops.
Why this story matters:
- The HALO trade illustrates a strategic pivot by investors to counteract AI disruption.
Key takeaway:
- Companies with substantial physical assets may offer more stable investments amidst rapid technological change.
Opposing viewpoint:
- Some critics argue that focusing on HALO could overlook potential growth in innovative, disruptible sectors that could adapt to AI advancements.
