Goldman Sachs Pivots, Urges Shorting Overheated HALO Stocks

Goldman Pivots, Launches Short Basket GSXUHALT

Less than a month after promoting its "HALO" (Heavy Assets, Low Obsolescence) investment thesis, Goldman Sachs has reversed course, recommending investors short a basket of overvalued U.S. companies. On Tuesday, the bank's theme trading team, led by Faris Mourad, introduced the GSXUHALT short basket, which specifically targets asset-heavy firms whose stock prices have soared despite having zero or even negative profit growth expectations. The pivot suggests the initial phase of the HALO trade has become crowded and disconnected from fundamentals.

This marks a rapid change from February 24, when Goldman argued that a massive capital expenditure cycle from tech giants—projected at $1.5 trillion between 2023 and 2026—would create a structural tailwind for heavy-asset industries. The bank previously highlighted that its heavy-asset portfolio had already outperformed its light-asset counterpart by 35% since the start of 2025, driven by investor demand for assets insulated from AI disruption.

Low-Quality Stocks Decouple From Negative Profit Growth

Goldman's new short recommendation stems from evidence of an indiscriminate market rally. The firm found that the GSXUHALT basket, composed of lower-quality companies, has actually outperformed a basket of high-quality, high-asset-intensity stocks (GSTHHAIR). This indicates that investors have been buying all heavy-asset stocks without differentiating between fundamentally sound businesses and those simply riding the trend.

The stocks included in the GSXUHALT basket are selected from the Russell 1000 index's most asset-intensive sectors. Crucially, Goldman screened out any companies tied to long-term growth trends like AI or robotics, isolating firms that have rallied significantly this year while their earnings forecasts remained flat or declined. This divergence between stock performance and profit outlook is the core justification for the short call.

HALO Pairs Trade Recommended as Valuation Hits 62nd Percentile

The valuation of heavy-asset stocks has become a key concern. As of last month, the group traded at a 3% price-to-earnings premium relative to light-asset stocks, a level that ranks in the 62nd percentile of its historical range over the past several decades. While not at a peak, this premium suggests the sector is no longer undervalued.

In response, Goldman is not abandoning the theme entirely but advocating for a more nuanced approach. The bank recommends that investors pair the GSXUHALT short position with long positions in other thematically strong opportunities. This strategy aims to capitalize on the internal divergence within the HALO trade, betting against companies with weak fundamentals while remaining invested in quality businesses with genuine competitive advantages and positive earnings momentum.