Summary of the HALO Trade and the Return of the “Boring” Winners

Author: Ruben Dalfovo, Investment Strategist

Date: February 24, 2026

Key Takeaways

• Small-cap stocks are gaining traction as market leadership expands beyond large-cap technology companies.
• HALO businesses focus on hard assets, consistent demand, and low risk of technological obsolescence.
• A five-item checklist can help investors avoid overpaying for perceived safety in investments.

Market Dynamics

In uncertain market conditions, investors often seek refuge in businesses that can maintain earnings despite economic slowdowns, high interest rates, or rapid technological changes. This shift is not necessarily a prediction of recession but a strategy to reduce investment fragility.

Why “Things You Can Touch” Matter Again

Two main factors are driving this rotation towards tangible assets:

1. Policy Uncertainty: Instability in regulations can dampen confidence and investment, making local and steady businesses more appealing.
2. Technological Change: The rapid advancement of AI raises questions about which business models can maintain pricing power versus those that may become obsolete.

Asset-backed businesses are gaining attention as they often provide essential products that are not subject to rapid obsolescence.

Understanding HALO Businesses

HALO stands for "heavy assets, low obsolescence risk." These businesses rely on expensive-to-replace assets and offer products that remain necessary over time. Examples include:

• Insurance Models: Companies like Berkshire Hathaway benefit from diverse earnings sources and sticky products.
• Energy Infrastructure: Firms involved in energy distribution and management have long-life assets that are less affected by market volatility.
• Essential Services: Businesses providing waste collection, water services, and regulated utilities are less glamorous but crucial for daily life.

The Five-Question HALO Checklist

To evaluate potential HALO investments, consider the following:

1. Assets: Are the assets difficult to replicate?
2. Demand: Is the demand for the product stable?
3. Pricing Power: Can the company increase prices without significant issues?
4. Balance Sheet: Can the company withstand higher interest rates or slower growth?
5. Valuation: Are you paying for actual cash flow or just a comforting narrative?

Risks to Consider

Even seemingly safe investments can carry risks:

• Small caps may suffer significantly during economic downturns, especially if credit conditions tighten.
• Asset-heavy businesses often have debt, making them vulnerable to rising bond yields.
• Regulatory changes can impact predictable cash flows in sectors like utilities and infrastructure.

Investor Playbook

To navigate the current market landscape:

• Focus on long-term trends rather than short-term headlines.
• Utilize the five-question checklist to make informed decisions.
• Monitor key indicators such as rising yields and credit spreads.
• Maintain diversification in your investment strategy.

The HALO Mindset

The HALO trade emphasizes reducing fragility rather than avoiding risk. In volatile markets, businesses tied to hard assets and essential demand can provide a sense of security. However, investors must remain vigilant about pricing, debt levels, and potential surprises in the market.