Asset-heavy stocks are outperforming asset-light stocks as investors look for a hedge against artificial intelligence risks, Goldman Sachs said in a note last week. It’s been dubbed the ” HALO ” trade, for “Heavy Assets, Low Obsolescence.” The idea is that companies with real assets will be insulated from AI disrupting their business models. The shift comes as sectors such as software have sold off as investors see them as vulnerable . “The ongoing debate about which industries are at risk from AI disruption has catalyzed sharp equity market rotations, with many physical, goods-producing industries the beneficiaries,” wrote Ben Snider, the firm’s chief U.S. equity strategist. “From a macro perspective, the outperformance of asset-heavy businesses is consistent with the recent decline in corporate cost of capital and increase in capex spending,” he continued. “However, asset-heavy businesses have outperformed by more than those historical macro relationships would normally suggest.” Goldman said its basket of asset-heavy stocks has outperformed the asset-light group by 25 percentage points since November. The firm recently named a number of new stocks to the asset-heavy basket. Companies are added based on their “asset intensity ratios,” which the firm calculates by taking assets, removing cash and intangibles, and dividing it by the company’s revenue. Joining Goldman’s list is GE Aerospace . Industrials, Goldman said, have been a primary beneficiary of investors looking for stocks protected from AI disruption. The aviation parts manufacturer will likely be busy — with a $190 billion order backlog, according to its January earnings report — whether or not the AI trade is successful. Goldman also added Disney to its list. Reacting to its February earnings report, analyst Michael Ng reiterated his buy rating on the stock, saying downside risk related to its theme park attendance has eased. He said this is a critical component of his investment case. “The company is a high quality [earnings per share] compounder supported by … robust theme park growth enabled by industry tailwinds and a $60bn investment over the next 10-years,” Ng wrote. “Magnificent Seven” member Meta also made the list, likely because it would be very difficult to replicate the reach of its core social media properties Facebook and Instagram META DIS YTD line META & DIS year-to-date chart.
