The Rise of “HALO” Stocks in the Age of AI
As artificial intelligence rapidly evolves, investors are reassessing their portfolios. Whereas software and tech stocks face potential disruption, a new strategy is gaining traction: investing in “HALO” stocks – companies with high asset value, anti-obsolescence and low technological disruption potential. This approach, highlighted by Josh Brown, focuses on businesses less susceptible to being replaced by AI.
Why Heavy Assets Matter Now
The core idea behind HALO investing is simple: AI excels at automating tasks and processing information, but it struggles to replicate physical assets. Industries like railroads, utilities, and infrastructure are inherently asset-intensive, making them potentially safer havens during a period of rapid technological change. These businesses often have established competitive advantages and generate consistent cash flow.
Three Funds Embracing the HALO Strategy
According to Russel Kinnel, several funds are well-positioned to benefit from this trend. Here’s a closer look at three options:
- Lazard Global Listed Infrastructure Open (GLFOX): This fund invests in essential infrastructure assets – railroads, utilities, toll roads, and airports – with a significant tilt towards European markets. It currently holds 30% in industrials and 0% in technology.
- FMI Common Stock Investor (FMIMX): Focused on modest- and mid-cap companies, FMI Common Stock prioritizes modest valuations and strong returns on equity. It allocates 40% to industrials and 14% to technology.
- Royce Premier Invmt (RYPRX): This small-cap fund invests in asset-heavy companies producing goods like chemicals, air conditioners, and railroad ties. It holds 35% in industrials and 17% in technology, emphasizing companies with strong balance sheets and competitive advantages.
Beyond Tech: Diversification as a Shield
The HALO strategy isn’t about abandoning technology altogether; it’s about diversification. Investors with portfolios heavily weighted in software and tech stocks can apply these funds to balance their exposure and mitigate risk. The focus on industrials provides a counterbalance to the volatility often associated with the tech sector.
The Importance of Valuation and Fundamentals
While asset-heavy companies offer a degree of protection, Kinnel emphasizes the importance of fundamental analysis. Funds like FMI Common Stock and Royce Premier prioritize companies with clean balance sheets, competitive advantages, and reasonable valuations. This disciplined approach can help investors identify companies that are not only resilient but similarly capable of generating long-term returns.
Potential Risks and Considerations
Even HALO stocks aren’t entirely immune to risk. Economic downturns can impact demand for infrastructure and industrial goods. Regulatory changes or unforeseen events could affect specific industries. Investors should carefully consider their risk tolerance and investment goals before allocating capital to these funds.
Did you know?
Interest in artificial intelligence led to approximately one in six equity funds in the Morningstar 500 having at least 10% of assets in semiconductor stocks in early 2025.
Looking Ahead: The Future of HALO Investing
As AI continues to advance, the demand for resilient, asset-backed investments is likely to grow. The HALO strategy offers a compelling approach for investors seeking to navigate this evolving landscape. By focusing on companies with durable competitive advantages and strong fundamentals, investors can potentially protect their portfolios while still participating in long-term market growth.
Pro Tip:
Consider your overall portfolio allocation. HALO funds are best used as a complement to, not a replacement for, a well-diversified investment strategy.
Frequently Asked Questions (FAQ)
- What exactly are “HALO” stocks? HALO stands for high asset, low obsolescence, representing companies less likely to be disrupted by AI.
- Are HALO stocks a guaranteed safe investment? No investment is guaranteed. However, HALO stocks offer a potentially more stable option compared to rapidly evolving tech sectors.
- Which fund is best for me? The best fund depends on your risk tolerance and investment goals. GLFOX offers broad infrastructure exposure, while FMIMX and RYPRX focus on smaller companies.
For further insights, explore 3 Great Portfolio Diversifiers and 3 to Avoid and learn more from Russel Kinnel.
Disclaimer: The author or authors do not own shares in any securities mentioned in this article.