Trade Alert: Hard Assets, Limited Obsolescence
Morgan Stanley puts a label on some of our recent top names.
Hard Assets, Limited Obsolescence
Morgan Stanley has finally given a tidy label to something we’ve been drifting toward in our recent trades: HALO—“Hard Asset, Limited Obsolescence.” Their basket is built around old-economy things that AI can’t refactor away in a weekend: metals and materials, utilities, railroads, pipelines, waste operators, defense, and towers. (tightspreads.substack.com)
Over the last year, that HALO basket has quietly crushed the “AI-disrupted” names—Morgan Stanley pegs HALO up close to 30% while their AI-disruption basket is down more than 40%, and positioning in HALO is still only around median hedge-fund exposure. (tightspreads.substack.com) In other words, the trade has already worked, but it’s not crowded yet.
That dovetails with something our readers have seen for a while: Portfolio Armor’s Top Names have more than doubled SPY since late 2022 across 139 rolling 6-month periods. (portfolioarmor.com/performance-top-names) When the algorithm keeps clustering around a certain kind of stock, it’s usually telling you something about where the real risk-adjusted opportunities are.
Portfolio Armor’s Version of HALO
If you look back at our recent trades, we’ve been circling the same idea from a different starting point:
A tungsten miner that feeds into high-end industrial and defense supply chains.
A coal producer plugged into power and industrial demand.
A cement and aggregates producer that literally pours the foundations for everything else.
None of those are going to be obsoleted by a better large language model. They’re all capital-intensive, hard-to-replicate businesses with assets planted firmly in the real world—exactly the kind of thing Morgan Stanley has put in its HALO basket.
What’s interesting is that we didn’t get there by copying the HALO list. We got there because Portfolio Armor’s Top Names algorithm, which knows nothing about marketing acronyms, has kept surfacing these sorts of names on 6-month expected return. The fact that our process and a big bank’s thematic basket have converged on the same neighborhood is… not the worst kind of confirmation.
Two More Names AI Can’t Replace
Today, two more names from our Top Names list fit that same pattern.
One is a company whose future is tied to uranium—a pure play on nuclear fuel at a time when governments are rediscovering that stable baseload power isn’t optional in an AI-driven world. The other is a leader in industrial batteries and stored-energy systems, providing backup power and resilience for data centers, telecom networks, and other critical infrastructure.
Both operate in niches where AI is a tool, not a threat: it can help them run better, but it can’t make what they sell obsolete. That’s exactly the kind of “hard asset, limited obsolescence” profile we like in this environment.
On the options side, we’re using hybrid structures designed to harvest near-term volatility around upcoming catalysts while maintaining uncapped long-dated upside. And, as usual when spreads are wide, we’ve used Black–Scholes on each leg to estimate a fair value for the combos—the idea is to let the underlying theses do the work, without overpaying for the optionality.
Full details below.
Today’s First Top Names Trade
Uranium / nuclear fuel theme
