I’ve been a trader and investor for 44 years. I left Wall Street long ago—-once I understood that their obsolete advice is designed to profit them, not you.
Today, my firm manages around $4 billion in ETFs, and I don’t answer to anybody. I tell the truth because trying to fool investors doesn’t help them, or me.
In Daily H.E.A.T. , I show you how to Hedge against disaster, find your Edge, exploit Asymmetric opportunities, and ride major Themes before Wall Street catches on.
Table of Contents
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H.E.A.T.
One question separates the businesses that compound through the AI era from the ones that get hollowed out by it. The entire framework flows from there.
The Question That Changes Everything
Here is the question we ask about every business we evaluate:
What happens to this company if intelligence becomes free?
Not cheaper. Not faster. Free. Available to any competitor, any customer, any new entrant, instantly, at zero marginal cost.
If the company’s edge is smarter people making better decisions — better analysis, better routing, better risk assessment, better research — then free intelligence is a catastrophe. It doesn’t just pressure margins. It attacks the source of value creation directly. The thing the company charges a premium for becomes available as a commodity.
If the company’s edge is physical reality — permits, right-of-way, geology, grid interconnects, replacement timelines measured in decades — then free intelligence is a tailwind. AI makes the mine run more efficiently. It does not change the fact that the copper has to come out of the ground. The moat is intact. The advantage is undiminished.
That distinction — between moats rooted in cognition and moats rooted in physical reality — is the most important one in investing right now. And no conventional screener can identify it.
“Price-to-book doesn’t measure cognitive vulnerability. Free cash flow yield doesn’t tell you whether that cash flow still exists once an AI agent has automated the workflow generating it. You need a different kind of filter entirely.”
That is what HALO is. Not a value screen. Not a quality screen. A filter for businesses whose competitive advantage survives a world where the cognitive layer gets commoditized. Three pillars: Heavy Assets, Low Obsolescence, and Low Disruption Risk. Each asks a distinct question. Together, they answer the one that matters.
HALO IN 60 SECONDS ▪ If a competitor can replicate it with code, hiring, and cloud contracts — it is not a Heavy Asset. ▪ If one technology shift can strand the asset or eliminate the demand — it is not Low Obsolescence. ▪ If AI can deliver the core product cheaper and faster — it is not Low Disruption Risk. → If it fails any one of those tests, it is not a HALO company. |
Why Screeners Fail This Test
Every value investor uses screeners. Low price-to-book. Low price-to-earnings. High free cash flow yield. These tools were built for a market where the central risk was mispricing: a good business trading at a discount because the market was inattentive or irrational. Find the discount. Buy it. Wait.
That market still exists. But it now coexists with a second market: businesses that are cheap because AI is actively hollowing them out, and the market has correctly started pricing in the damage. Screeners cannot distinguish between those two categories. A financial data platform trading at 15x earnings and a rail network trading at 15x earnings look identical on a screener. They are not the same investment.
The screener rewards what looks clean: high return on equity, asset-light models, wide margins, “capital efficiency.” In normal times, those are often markers of excellent businesses. In an AI world, they are sometimes markers of businesses built entirely on cognitive work. Asset-light can mean copyable. High margins can mean you are charging a premium for a function that AI is learning to perform for free.
So instead of screening for ratios, the HALO framework screens for architecture: how does this business actually create value, and is that method of value creation physically durable or cognitively vulnerable?
Pillar One: Heavy Assets
The first question: what does this company actually own? Not what it does. Not what its strategy deck says. What it owns — in the ground, on the ground, in the grid, in the right-of-way.
Physical assets create a specific kind of competitive advantage that ideas and software cannot: replacement time. You can copy a software platform. You can hire the team that built it and recreate it. You cannot copy a copper mine on any human timeline. You cannot replicate a rail right-of-way that has run through the center of a city for roughly 150 years. You cannot reproduce a network of freight terminals in the locations where they currently stand — at any price, in any reasonable timeframe — because the real estate, the permits, and the operational history required to stand them up took decades to accumulate.
The test for Heavy Assets is not whether a company owns some equipment. The test is whether the physical assets are the source of competitive advantage — the thing that would take a competitor years and billions of dollars to replicate, and whose removal would cause the business model to collapse entirely.
01 Heavy Assets If a well-funded competitor started today, how long and how much would it take to replicate the core physical infrastructure of this business?
WHAT PASSES The answer is years, not months, and billions, not millions. Quarries with geological scarcity and decade-long permitting timelines. Pipelines with easements that took years of right-of-way negotiation to assemble. Power generation facilities with grid interconnection queues stretching half a decade. Rail networks with roughly 150 years of embedded infrastructure. Freight terminal networks in urban and suburban markets where suitable industrial real estate is increasingly unavailable. These are not assets that get disrupted by a software release. WHAT FAILS The answer is months, and the path is obvious. Software platforms, financial data businesses, advisory firms, and logistics intermediaries whose core function is matching, routing, or analysis. A competitor with sufficient engineering talent can replicate the core product on a competitive timeline. The moat is narrow regardless of current market share. THE TRAP TO AVOID Capital-intensive software infrastructure. Cloud computing, GPU clusters, and data centers are physically heavy but cognitively replaceable — the value is in the compute and the models running on it, not in the buildings. A company that owns server racks is not a HALO company. A company that owns copper mines is. The distinction is whether the physical asset is the product or merely the container for a cognitive product. |
Pillar Two: Low Obsolescence
Heavy assets alone are not enough. A company can own irreplaceable physical infrastructure and still be a poor investment if the demand for that infrastructure is erratic, cyclical, or structurally declining. Pillar two asks a different question: not what does the company own, but how stable is the need it serves?
The word “obsolescence” has a specific meaning here. It is not about competition. It is about whether the fundamental need the business serves is durable across decades. Electricity is not going to become optional. The requirement to move physical goods across the country is not going away. The need to extract and process minerals for construction is structural, not cyclical. These are not preferences that shift with consumer sentiment. They are physical necessities of industrial civilization.
The practical test is revenue and margin stability. A business that has delivered consistent revenue and consistent gross margins across five years of varying economic conditions — inflationary shocks, interest rate cycles, demand disruptions — is demonstrating something specific: its customers need what it provides, and they cannot easily stop paying for it. That is the difference between a toll road and a product. The toll road charges for access to infrastructure that cannot be bypassed. The product competes for spending that can be redirected.
02 Low Obsolescence Is the underlying need this business serves structural and durable, and does the revenue record prove it?
WHAT PASSES Revenue stability is high: the year-to-year variation in revenue is small relative to the long-run mean. Gross margin stability is similarly high. The business serves a need that customers cannot defer indefinitely — power, freight, water, minerals for construction, industrial throughput. Contracts are long-duration. Rates are regulated or operationally sticky. The cash flow profile looks more like a toll collector than a product seller. WHAT FAILS Revenue is lumpy, project-dependent, or tied to a single product cycle. High fixed-asset intensity combined with volatile revenue is a warning sign, not a qualification — it means the assets are expensive and the income stream is unreliable. Any business where a single regulatory change, a single technology substitution, or a single customer decision could materially reset the revenue base fails this pillar. THE TRAP TO AVOID Regulated businesses with political risk. Utilities and pipelines score extremely well on stability metrics, but regulated asset returns can be compressed by political decisions that have nothing to do with the underlying economics. Low Obsolescence measures the structural durability of the need, not the absence of political risk. These are separate risk categories and should be assessed separately. |
Pillar Three: Low Disruption Risk
The third pillar is where the HALO framework diverges most sharply from traditional quality investing. It asks the question that no financial ratio addresses: how much of this business’s value creation depends on cognitive work that AI can replicate?
For most of financial history, cognitive complexity was a moat. Complicated underwriting models, proprietary research processes, sophisticated financial analysis, multi-variable logistics optimization — these were things that took years to build and expensive teams to maintain. The difficulty of the cognitive task was the source of the advantage.
AI inverted that logic. The harder the cognitive task, the more valuable it was to automate. The most sophisticated credit analysis, the most nuanced document review, the most complex pattern recognition in financial datasets — these are exactly the functions that large language models attack first, because the return on solving them is highest. Cognitive sophistication went from being a moat to being a target.
The critical distinction is between businesses where AI is an efficiency tool versus businesses where AI is a substitute product. A railroad with better AI-powered routing is still a railroad. The AI improved the operation; it did not change what the railroad is. A credit rating agency whose analysts are replaced by a language model has not improved its operation. It has been replaced by its own tool. The physical infrastructure of the railroad survives full cognitive automation. The analytical premium of the credit agency does not.
03 Low Disruption Risk If you stripped out every human cognitive function in this business and replaced it with an AI agent, how much of the competitive advantage would survive?
WHAT PASSES Almost all of it. The value the company delivers is fundamentally physical: moving molecules, generating electrons, extracting minerals, connecting infrastructure nodes. The humans in the business maintain and operate physical systems; they do not create the value through cognitive output. Replace every analyst, planner, and optimizer with an AI agent and the pipeline still moves gas, the mine still produces copper, the terminal still loads trucks. AI makes the operation more efficient. It does not change what the operation is. WHAT FAILS Almost none of it. The business’s revenue is primarily generated by analysis, advice, matching, routing, underwriting, or research — cognitive functions that AI agents are already demonstrating they can perform faster and cheaper. Financial data platforms, ratings agencies, research firms, logistics intermediaries, and advisory businesses fall into this category. The physical assets they own are incidental. The value they deliver is cognitive, and the cognitive layer is exactly what is being commoditized. THE TRAP TO AVOID Physical businesses with cognitive premiums. A company can have high fixed-asset intensity and still be significantly disruption-exposed if the margin premium comes from cognitive work layered on top of the physical base. An LTL freight operator that earns above-average returns because of proprietary dynamic routing algorithms has a physical moat and a cognitive premium. The physical moat survives. The cognitive premium gets compressed. The HALO framework does not disqualify the business — but it flags the premium as something that should not be capitalized at a durable multiple. |
The Metrics That Signal HALO
The framework cannot be reduced to a formula — formulas produce false precision when the underlying question is architectural. But financial statements do contain signals that triangulate the answer. Here are the seven we weight most heavily, and what each one is actually measuring:
1. Net PPE / Total Assets. Fixed asset intensity. A high ratio means the business is physically grounded. Utilities, pipelines, rail, and mining companies typically run 50% to 80%. Software companies run under 10%. This is the most direct measure of how anchored a business model is in physical infrastructure.
2. Capex / Depreciation (5-year average). Reinvestment rate. A ratio consistently above 1.0 means the company is maintaining and expanding physical infrastructure, not harvesting it. Ratios well above 1.0 sustained over many years can also signal ‘treadmill capex’ — assets that require perpetual investment just to maintain competitive position. Context matters.
3. Gross PPE / Revenue. Capital intensity: how much physical infrastructure is required to generate each dollar of revenue. High ratios indicate assets that are genuinely load-bearing for the business model, not incidental to it.
4. Revenue CoV and Gross Margin CoV (5-year). Coefficient of variation applied to both revenue and gross margins over five years. Low values mean the business delivers consistent results across varying economic conditions — the hallmark of structural necessity rather than discretionary demand. Both metrics should be evaluated together; stable revenue with volatile margins may indicate missing pricing power.
5. Fixed Assets per Employee. Physical intensity per unit of human labor. High values indicate a business where value creation is primarily in the infrastructure, not the workforce. A copper mine may carry millions of dollars of fixed assets per employee. A financial advisory firm may carry tens of thousands. The ratio directly measures how dependent the business model is on human cognitive labor versus physical capital.
6. Intangible Assets / Total Assets. Low is better for HALO. Minimal intangible assets — goodwill, capitalized IP, customer relationship assets — indicate a business that derives value from physical things. Note that accounting conventions significantly understate intangibles in many businesses; treat this as one directional signal rather than a definitive measure.
7. Gross Margin vs. Physical Peers. If a company’s margins are significantly above those of physically comparable peers, ask what is doing the work: physics, or cognition? Elevated margins in a capital-heavy business sometimes reflect a cognitive premium — a proprietary process, a data advantage, a software layer — that AI will target over time. Structural physical advantage produces durable but moderate margins. Cognitive premiums produce higher margins with higher disruption exposure.
Running the Test: Two Companies, Two Verdicts
The three pillars work as an integrated filter. A company that passes one pillar and fails the other two is not a HALO company. Here is the framework applied to two real businesses that sit at opposite ends of the spectrum:
CSX Corporation — Class I Railroad
Company | Heavy Assets | Low Obsolescence | Low Disruption Risk |
CSX / Class I Railroad | PASSES. Owns roughly 19,500 route-miles of track with embedded right-of-way that is legally and physically near-impossible to replicate. No new Class I railroad has been built in roughly a century. Replacement cost is estimated in the hundreds of billions. | PASSES. Rail freight demand is structurally tied to industrial production, construction materials, and energy. Revenue has been remarkably consistent across cycles. The network itself is the moat, not the service layer built on top of it. | PASSES. AI can optimize routing, maintenance scheduling, and locomotive utilization — and CSX is already using it for those purposes. But AI cannot move the track. Strip out every cognitive function and the competitive advantage of the physical network is completely intact. |
VERDICT ✔ Strong HALO. AI makes it run better. It does not change what it is. |
Moody’s Corporation — Credit Ratings and Analytics
Company | Heavy Assets | Low Obsolescence | Low Disruption Risk |
MCO / Credit Ratings & Analytics | FAILS. Moody’s owns data, analytical models, brand reputation, and regulatory relationships. These are intangible assets. The physical infrastructure — offices, servers, equipment — is incidental. No physical barrier prevents replication of the analytical product. | CONDITIONAL. Ratings revenues have been relatively stable, supported by regulatory requirements that mandate recognized agency ratings for certain instruments. The regulatory moat is real. But it protects the license, not the methodology — and it is the methodology that commands the premium valuation. | FAILS. Moody’s core competitive advantage is analytical: credit modeling, default probability estimation, sector expertise, research synthesis. These are precisely the cognitive tasks that large language models perform with increasing proficiency. Strip out the human cognitive work and what remains is a regulatory license and a brand — valuable, but not worth the current multiple. |
VERDICT ✖ Not HALO. The regulatory license provides a floor. The analytical premium — which drives the multiple — is directly in the disruption crosshairs. |
The Hardest Calls: Companies on the Boundary
The test is unambiguous at the extremes. A copper mine passes cleanly. A financial data platform fails cleanly. The interesting analytical work happens in between — with companies that have genuine physical assets but also meaningful cognitive exposure. Three patterns appear most often.
The Physical Business With a Cognitive Premium
Some businesses own genuinely heavy physical assets and serve structural demand — but have layered a cognitive premium on top of the physical foundation. An LTL freight company that owns terminals and earns its margin through network density passes the HALO test. The same company, if a significant portion of its premium pricing comes from proprietary dynamic routing algorithms, has a physical moat and a cognitive premium that are analytically distinct. The moat survives. The premium gets compressed. Investors who capitalized the cognitive premium at a durable multiple will be disappointed. Investors who understood the distinction will not be.
The Commodity Business Without Cost Advantage
Heavy physical assets alone do not guarantee a HALO score. A commodity producer with undifferentiated output and no cost-curve advantage fails the Low Obsolescence test even if the assets are physically irreplaceable. The test is not whether you own things. It is whether owning those things translates into stable, durable cash flows. A marginal copper producer sitting at the high end of the cost curve passes on physical intensity and fails on everything else. A low-cost producer at the bottom of the cost curve — where every dollar of price improvement falls nearly straight to free cash flow — passes on all three. Cost position is not a separate consideration. It is embedded in the obsolescence test.
The Regulated Utility With Political Risk
Utilities almost always qualify on the metrics: high fixed-asset intensity, extremely stable revenue, near-zero cognitive disruption risk. The risk the HALO framework does not capture is regulatory and political — a state commission cutting allowed returns, a federal mandate forcing asset stranding, an administration restructuring the rate-setting framework. These risks are real. They are also distinct from AI disruption risk. The HALO framework filters the latter, not the former. Investors using it should apply their own political risk assessment on top of a HALO qualification, not assume that qualifying eliminates all risk categories.
THE QUESTION BEHIND ALL THREE QUESTIONS What would happen to this business if intelligence became free? There is a single thought experiment that unifies all three HALO pillars. Run every business you evaluate through it. For a copper mine: not much changes. The mine still has to be excavated. The ore still has to be processed. The copper still has to be refined and delivered. Free intelligence makes the operation more efficient. It does not change the fact that the copper has to come out of the ground. The physical constraint is the moat, and the moat is intact. For a credit rating agency: a great deal changes. The analytical work that commands the premium price becomes available to anyone with access to a sufficiently capable model. The regulatory license survives. The brand partially survives. But the methodology premium — the thing that justifies the multiple — is directly attacked by exactly the technology that is improving fastest. If your honest answer is ‘not much,’ you are probably looking at a HALO business. If your answer involves more than a moment’s hesitation, ask exactly where the margin comes from — and whether AI is building a cheaper source of the same thing. |
The framework is not a formula. It is an architectural lens — a structured way of asking where value comes from and whether that source is physically durable or cognitively vulnerable. Applied consistently, it surfaces a category of business the current market is systematically underpricing: companies sitting at the physical bottlenecks of the AI economy, compounding quietly while the market chases the next model release.
The Moon Was Never About the Moon
Control of the high ground has always shaped what happens below it. Apollo was the
opening move. Artemis is the next — NASA sending crews back to the Moon and building
the infrastructure to keep them there. Satellites already run global supply chains,
communications, and economies. Nations are spending heavily to protect that access.
The Tuttle Capital Space Industry Income Blast ETF (SPCI) holds 11 pure-play names
across that stack. Could SPCI have a place in a diversified portfolio?
Learn More at incomeblastetfs.com/etf/spci.
News vs. Noise: What’s Moving Markets Today
Not quite what we expected yesterday. Over the weekend the ceasefire talks fell through, oil opened Sunday night big, stocks opened down big, everyone on Twitter predicted a black Monday, and the market proceeded to erase all the Iran war selloff.
With all that’s going on, SPY is now near all time highs…..
Oil is still near $100……
Rates are still elevated…..
I guess the market took solace yesterday in the fact that oil came well off the highs, and even though talks broke down the cease fire stayed in place.
A lot of yesterday’s rally was short covering. Software, for example, was up big….
There’s an undercut and rally there if you wanted to play it, I wouldn’t. Again, I think there are certain software names that have unfairly sold off, like cybersecurity, but I wouldn’t play the entire basket unless it’s a trade.
Meanwhile, Blackstone $BX ( ▲ 0.61% ) which has been crushed in the private credit sell off, had a big day…..
and CarMax $KMX ( ▼ 1.98% ) , which is a decent proxy for the consumer, also exploded higher….
Short covering, or the market deciding private credit and the consumer are ok? I think short covering, but time will tell.
What Iran Tells Us About UFO Disclosure
When governments confront unknown threats in their airspace, defense budgets surge
and the same aerospace and surveillance companies move hardest. On March 2nd,
Northrop jumped 6% and Lockheed 3.3% on the Iran news — and President Trump has
since ordered the formal release of government UAP files, with the Pentagon confirming
compliance. So if a conventional conflict can move these stocks this fast, what happens
when the bigger story breaks?
See the UFOD holdings: [thetruthisoutthereufod.com
ETF News
$MEMY Holdings Update:
We replaced $NUE ( ▲ 0.33% ) $MRCY ( ▼ 0.46% ) $PAAS ( ▼ 0.92% ) and added $KTOS ( ▼ 1.59% ) $MP ( ▲ 0.89% ) $CCJ ( ▼ 1.98% ) All 5% positions.
For a full list of MEMY holdings, visit:
https://incomeblastetfs.com/etf/memy
Distributor: Foreside Fund Services, LLC
A Stock I’m Watching
This one is already up big, and yesterday moved back above the 200 day moving average. It’s currently up 15% pre market. After the close they announced the acquisition of DustPhotonics, making them a player in optics. If you have seen how the optics stocks have been moving lately then there could be a lot more upside here. Full disclosure, we own $CRDO ( ▲ 5.96% ) in $MEMY ( ▼ 0.47% )
In Case You Missed It
The H.E.A.T. (Hedge, Edge, Asymmetry and Theme) Formula is designed to empower investors to spot opportunities, think independently, make smarter (often contrarian) moves, and build real wealth.
The views and opinions expressed herein are those of the Chief Executive Officer and Portfolio Manager for Tuttle Capital Management (TCM) and are subject to change without notice. The data and information provided is derived from sources deemed to be reliable but we cannot guarantee its accuracy. Investing in securities is subject to risk including the possible loss of principal. Trade notifications are for informational purposes only. TCM offers fully transparent ETFs and provides trade information for all actively managed ETFs. TCM's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. Trade notification files are not provided until full trade execution at the end of a trading day. The time stamp of the email is the time of file upload and not necessarily the exact time of the trades. TCM is not a commodity trading advisor and content provided regarding commodity interests is for informational purposes only and should not be construed as a recommendation. Investment recommendations for any securities or product may be made only after a comprehensive suitability review of the investor’s financial situation.© 2026 Tuttle Capital Management, LLC (TCM). TCM is a SEC-Registered Investment Adviser. All rights reserved.