The AI boom has caused some serious changes in the stock market this year.
Investors have been very optimistic about the AI companies and the infrastructure they need, like data centers and power.
But they’re also afraid that AI might disrupt other companies, like software, or that it could cause high unemployment.
That’s led to interest in another type of stock - HALO companies (Heavy Assets, Low Obsolescence).
The idea is pretty simple.
Buy businesses that own a lot of physical assets that are difficult to replace or copy, and ones that provide essential products or services that won’t be disrupted by AI or the next new technology.
This includes companies like:
ExxonMobil that owns huge amounts of oil reserves and the infrastructure to recover it, refine it, and get it to market
WasteManagement that owns the landfills and the routes that help the U.S. dispose of trash
Vinci S.A. that manages a network of toll roads and airports
AI won’t change businesses like these.
In fact, AI could help make them more efficient and make them more profitable.
Roundhill Investments launched a HALO ETF (LHOA) that’s outperformed the S&P 500 since it launched in May.
Here’s the top 10 holdings to give you an idea of the kinds of stocks it buys:
Premium subscribers will recognize some of these stocks.
We bought before the HALO term was even coined.
Dividend investors naturally end up owning some of these types of businesses.
The heavy assets generate reliable cash flows and make the businesses hard to compete with
The low obsolescence lets them grow their dividends for decades
AI can help create software that costs almost nothing to copy and distribute.
But it won't help much if you’re trying to build a portfolio of commercial real estate like Realty Income.
Premium subscribers are getting earnings updates on three HALO companies.
But for the free subscribers, I thought it would be good to give you a framework to see how your portfolio stacks up on HALO companies.
📋 Check Your Portfolio: What’s Your HALO Score?
You can run each company you own through this three question screen.
Replicability: If a new competitor raised $1 billion tomorrow, could they duplicate your top holding’s main physical assets in under 3 years?
(Yes = Low Assets | No = Heavy Asset)
Essential Demand: Will customers still need this exact product or service during a severe recession or a major tech shift?
(Yes = Low Obsolescence | No = Disruption Risk)
Cash Conversion: Does the company generate enough real, operational cash flow to fully fund its operations and payout without relying on constant debt or share dilution?
(Yes = Dividend Safe | No = Dividend at Risk)
Need Some More Ideas for HALO Stocks?
I’ve put together a free guide featuring 10 top global HALO dividend stocks across energy, utilities, real estate, and transportation, complete with their current yields and payout ratios.
One Dividend At A Time,
-TJ
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Fiscal.ai: Financial data
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I like the cash conversion question. It keeps the focus on whether those hard-to-replace assets produce cash after the upkeep is paid.