The Stocks That Are Working This Year | WAYT?

Key Concepts

• HALO Theme Continuation: The discussion reinforces the “HALO” (Heavy Assets, Low Obsolescence) investment theme, emphasizing companies resilient to AI disruption.
• AI Disruption Concerns: A pervasive anxiety about AI’s impact on various industries, particularly software, media, and financial services, drives investment decisions.
• Market Volatility & Risk: The segment highlights the potential for significant losses in speculative investments and the inherent volatility of the market.
• Consumer Spending Strength: Travel stocks are presented as a strong indicator of continued consumer spending despite economic uncertainty.
• Prediction Markets Emergence: The launch of prediction markets and their potential impact on crypto trading volume are analyzed.

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Market Overview & The HALO Theme

Building on the previous segment’s introduction of the “HALO” theme, the discussion continues to emphasize investing in companies with “Heavy Assets, Low Obsolescence” as a defense against AI disruption. The market is characterized by a search for refuge from the potential value destruction AI could inflict on asset-light businesses. The S&P 500’s performance, with 337 stocks up despite a relatively unchanged index, suggests a broadening market, but driven by a specific fear rather than a traditional rotation. Sector performance year-to-date (2026) shows Energy (+20%), Materials (+16.4%), and Consumer Staples (+12.3%) outperforming. The IGV (iShares Expanded Tech-Software Sector ETF) shares outstanding are near 5-year lows, indicating selling pressure.

Prediction Markets & Crypto Impact

The launch of prediction markets is examined, with a focus on potential “cannibalization” of crypto trading volume. While individual trades are small, the concern is that funds may shift from other speculative investments to prediction markets, rather than representing new capital. Anecdotal evidence suggests a potential Bitcoin/ETH sell-off linked to this trend, though this remains unproven. Dan Dolev’s analysis indicates an Average Revenue Per User (ARPU) of $191 for these markets, slightly below the estimated $200.

The “DGEN Dow” & Historical Losses

A cautionary tale is presented through the analysis of the “DGEN Dow” – a portfolio of meme stocks. A JP Morgan report reveals that 40% of companies in the Russell 3000 have experienced a 70% decline from which they never recovered. The 2021 “DGEN Dow” (GameStop, AMC, Mona, Teddoc, Docuine, Zoom, Pelaton, Shop, Roku, and Block) serves as a stark example, with the potential for 80% losses from extended holding periods. A new 2026 “DGEN Dow” (Archer, Apple, Coinbase, Carvana, DJT, DraftKings, Roblox, Palantir, and Nvidia) is currently down 69%, reinforcing the risks associated with speculative investments.

Company Specific Analyses

Spotify: Despite initial positive reaction to earnings, Spotify’s stock has declined from $800 to $476, facing increasing competition in the podcasting space from Netflix and YouTube. The market is perceived as saturated with content. Q4 revenue grew 13% year-over-year, premium revenue 14%, and advertising revenue 4%, with gross margin expanding to 33.1%. Q1 guidance projects 759 million Monthly Active Users (MAUs) and 293 million premium subscribers. Spotify is integrating AI, allowing engineers to remotely fix bugs and deploy updates.

Travel Stocks (Marriott & Hilton): These are strongly advocated for, reflecting continued consumer spending strength, particularly within a “K-shaped” recovery. Marriott and Hilton benefit from their loyalty programs and brand licensing model, operating more as marketing businesses than real estate owners. Expedia is contrasted, showing poor year-to-date performance and facing potential disruption from AI-powered travel booking tools.

IMAX: The speaker’s personal investment in IMAX is disclosed, citing a 16% year-over-year increase in January box office revenue, with IMAX capturing 13% of the Avatar: The Way of Water box office. IMAX’s brand awareness is comparable to ESPN, Marvel, HBO Max, and Spotify, with a surprisingly diverse audience (50% male, 50% female, significant 25-34 year old representation). The company is on track for a record year, with strong system installations and box office numbers. IMAX leverages AI for remote bug fixes and updates.

Broker-Dealers & Financial Sector Volatility

The broker-dealer and securities exchanges ETF (IAI) is analyzed, noting high dispersion within the sector. The ETF includes companies like Goldman Sachs, Morgan Stanley, Schwab, CME, Moody’s, S&P Global, NASDAQ, Interactive Brokers, LPL Financial, Raymond James, CBOE, Robinhood, and Coinbase. Potential disruption from AI-driven trading platforms and the impact of the prediction market trend are highlighted, suggesting potential volatility.

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Conclusion

The segment reinforces the overarching theme of navigating a market increasingly shaped by the fear of AI disruption. The “HALO” investment strategy remains central, while caution is advised regarding speculative investments and the potential for significant losses. Strong consumer spending, as evidenced by the bullish outlook on travel stocks, provides a counterpoint to broader economic uncertainty. The emergence of prediction markets adds another layer of complexity, potentially impacting crypto trading volume. Overall, the discussion emphasizes the need for careful analysis, risk management, and a nuanced understanding of the evolving market landscape.