The ETF Underdogs, Part 7: High Asset, Low Obsolescence (HALO)

VanEck Environmental Services ETF

EVX

-0.8%

Companies that deal with garbage collection, wastewater treatment, and environmental remediation are classic examples of high asset, low obsolescence businesses.

The reason comes down to the nature of the industry. Waste management and environmental services rely on extensive physical infrastructure. Landfills, recycling facilities, transfer stations, treatment plants, specialized trucks, and hazardous waste processing facilities are all expensive, long-lived assets that cannot easily be replaced by software or automation alone.

These businesses also operate within dense regulatory frameworks that create high barriers to entry. Local governments tightly control landfill permitting, environmental compliance standards, and disposal regulations, which makes it extremely difficult for new competitors to enter the market.

As a result, the industry tends to be dominated by a handful of large operators with nationwide footprints and deep capital investment. That combination of regulated demand and hard infrastructure is exactly what the HALO concept tries to capture.

It may not be an obvious theme, but there is an ETF that targets this space. EVX has been around since 2006, although it has struggled to gain traction, with just under $100 million in assets under management. The fund charges a 0.55% expense ratio and tracks the MarketVector Global Environmental Services Index.

Several of the top holdings are names investors will recognize. Waste Management, Republic Services, and Waste Connections form a dominant trio in the North American waste collection and landfill market, effectively creating an oligopolistic structure across many regional disposal networks.

Beyond the major waste haulers, the ETF includes some interesting supporting businesses. Ecolab specializes in industrial cleaning, water treatment, and sanitation technologies used across industries ranging from hospitality to food processing. Clean Harbors focuses on hazardous waste disposal, environmental remediation, and emergency spill response, services that are essential for industries handling toxic materials.

There is also noticeable overlap with water infrastructure and environmental technology companies. Holdings such as Advanced Drainage Systems, Veralto, and Xylem reflect the broader ecosystem surrounding water management, filtration, and environmental monitoring.

AdvisorShares HVAC & Industrials ETF

HVAC

-0.59%

An even more unusual niche ETF is HVAC, which focuses on the heating, ventilation, and air conditioning industry, with a ticker that fits the theme perfectly.

This ETF includes HVAC equipment manufacturers, service providers, distributors, and engineering firms. Many of these companies operate across both residential and commercial markets, giving them exposure to everything from home climate systems to large-scale office building installations.

At first glance, HVAC may not seem like an especially innovative industry. In reality, there has been significant technological progress in recent years.

Advancements in energy efficiency standards, electrification, smart thermostats, and integrated building automation systems have pushed HVAC systems toward smarter, more efficient designs. As buildings increasingly incorporate connected devices and energy management systems, HVAC technology has become a central component of modern infrastructure.

Another feature that makes the industry appealing is its recurring revenue profile. Installation is only the first step in a long lifecycle. HVAC systems require regular maintenance, servicing, and replacement parts over time.

Companies can generate revenue across multiple stages, including system installation, ongoing service contracts, equipment replacement, engineering design, and energy optimization upgrades. That dynamic tends to make the industry somewhat less cyclical than other segments of industrial manufacturing.

Despite the interesting theme, the ETF itself is still quite small. HVAC currently manages just over $8.2 million in assets under management, which raises some questions about long-term viability. Liquidity is also relatively limited, with a 30-day average bid-ask spread around 0.27%.

The holdings are a mix of well-known industrial and building technology firms. Some notable positions include Comfort Systems USA, Trane Technologies, Parker-Hannifin, and Rockwell Automation.

From a HALO perspective, the industry fits the concept well. HVAC systems are deeply embedded in physical infrastructure and require large installed asset bases. Buildings, factories, hospitals, and data centers cannot function without climate control systems, and replacing those networks is expensive and time-consuming.

That combination of hard assets, regulatory standards around energy efficiency, and mission-critical functionality makes HVAC companies relatively resistant to rapid technological obsolescence compared with purely digital businesses.

Hoya Capital Housing ETF

HOMZ

+0.23%

Most real estate investment trusts (REITs) would qualify as HALO businesses almost by definition. Real estate is one of the clearest examples of a hard-asset industry. Buildings, land, and infrastructure cannot simply be replaced by software or automated away.

You cannot code an apartment building or generate housing supply with an algorithm. In fact, if anything, artificial intelligence may end up benefiting real estate owners by improving property management, tenant screening, building automation, and energy efficiency.

That said, some adjacent businesses could face disruption. Real estate data providers and brokerage platforms, such as CBRE and other intermediaries that rely heavily on information asymmetry and market data, could see their roles challenged as AI improves data accessibility and analytics.

Even so, not all real estate exposure is equally attractive. Personally, I have never been a big fan of broad REIT ETFs. Those funds often mix together property types with very different fundamentals.

Office real estate still faces structural headwinds from remote work. Data centers have already experienced a significant run-up tied to the AI boom. Industrial properties have benefited from e-commerce but remain tied to economic cycles. Self-storage is interesting, but has limited options.

If the goal is to focus specifically on housing, I think one of the more thoughtful options available is HOMZ. The ETF currently has $36 million in AUM and tracks the Hoya Capital Housing 100 Index.

What makes the construction interesting is that it goes beyond traditional REIT exposure. The portfolio still includes a core allocation to residential rental operators, but it also broadens the definition of the housing ecosystem. Homebuilders and home improvement companies are included as well, which introduces a consumer discretionary element and captures multiple parts of the housing value chain.

This structure helps diversify what would otherwise be a fairly narrow slice of the REIT universe. Instead of relying solely on rental operators, the fund captures housing demand through construction activity, renovation spending, and related consumer trends.

Income investors may also find it appealing. HOMZ currently offers a 2.71% 30-day SEC yield after accounting for a 0.30% expense ratio and distributes income on a monthly basis.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.