EHLS: New Monthly Highs

AMID MINING COMPANY VOLATILITY

The chart reflects market prices (MKT). The fund’s expense ratio is 2.62%, which includes estimated dividends and interest expense on short positions. If this were excluded, the expense ratio would be 1.15%. The fund's inception was 4/2/2024. The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than their original cost, and current performance may be lower or higher than the performance quoted. For standardized performance, visit https://www.evenherd.com/ehls.

We’re pleased to announce that the fund posted a net gain of +1.81% (MKT) for October, despite experiencing volatility in the second half of the month, primarily driven by precious metals and mining-related stocks.

EHLS maintains significantly less concentration than the S&P 500, where the top ten index components comprise nearly 40% of the index, while the fund’s top ten accounted for less than 14% at month-end with only 64.45% net equity exposure.

IN THIS UPDATE

• Sector Leadership: Precious metals mining leads all clusters with the widest performance gap; broadly, financials continue to weaken, with utilities, materials, and industrials rising. Real estate remains the weakest, while staples now meaningfully lag.

• Insurance Declines: The insurance space broadly continues to experience weakness in our system, affecting most firms directly involved, even brokerages.

• Key Positions: Top holdings include Solaris Energy Infrastructure (SEI) for unique AI power exposure and Ramaco Resources (METC) for rare earths, with some speculative gains trimmed to manage risk.

• Equity Outlook: Expected to maintain 60–65%+ net equity exposure into November, viewing AI strength as a boom (not bubble), while monitoring rare earth volatility and scarce short opportunities in mining.

LOOKING BACK

We’ve confirmed sector rotations and divergences among the industries we track. Unsurprisingly, precious metals mining firms have maintained strong momentum, consistent with prior discussions, although witnessing some volatile gyrations this month. We previously cautioned about the financial sector, which had led in our system since July 2024 but briefly ceded that position to utilities. It has now lost the lead again to utilities, and the ongoing downtrend in financials, particularly driven by insurance-focused businesses, appears poised to persist.

Specialty insurers experienced the sharpest declines this month. The fund has gained limited short exposure in this area, including positions in names like Employers Holdings (EIG). However, the absence of compelling long opportunities has constrained our ability to build significant short exposure. Regional banks also posted meaningful declines, which we are closely monitoring. In related news, stress in private debt markets—stemming from high-profile fraud discoveries—has created ripples, especially for firms with heavy allocations to this space.

The fund experienced a strong mid-month surge followed by heightened volatility, with the mining sector as the primary driver. The rare earth theme, which has gained traction over the past few months, saw a sharp pullback after an initial robust advance. Outside of gold and other precious metals mining, the fund’s largest rare earth exposure is Ramaco Resources (METC), which nearly doubled in value during the first two weeks of October—temporarily becoming the portfolio’s top holding—before relinquishing those gains by month-end. Volatility has been most pronounced among U.S.-based players, amid ongoing federal announcements of partnerships and investments aimed at enhancing domestic supply chain independence.

LOOKING FORWARD

The mining cluster, led by precious metals such as gold, now shows the widest performance gap over any other sector and has maintained leadership since May—unlike prior leaders like regional banks. We expect it to remain a key contributor to net exposure, with shorting opportunities scarce but under review. Rare earth holdings, including Ramaco Resources (METC), Energy Fuels (UUUU), Idaho Strategic Resources (IDR), and NioCorp Developments (NB)—our only pre-revenue position in this area—will be kept selective and capped to manage correlated risks, supported by ongoing policy tailwinds.

Our proprietary “sea level” metric continues to reflect broad market strength despite late-October softening driven by mega-cap tech. Absent a sharp reversal, we plan to maintain net equity exposure at 60–65% or higher through November. Financials, dominant since August 2024, are now trending toward neutral or underweight as utilities, materials, and industrials gain ground. Energy is firming, while consumer staples and real estate remain deeply out of favor with minimal exposure.

We continue to view AI strength as a structural boom, not a bubble. Despite Q1 2025 volatility, most AI-related names have reached new highs. Top holdings include Celestica (CLS) and Solaris Energy Infrastructure (SEI), the latter addressing the critical power bottleneck highlighted in hyperscaler earnings. We redeemed IREN Ltd in October to reduce concentration in lower-margin AI hosting and enhance diversification. AI-exposed names, inclusive of robotics, battery, and sensor-related plays, remain among the strongest in our system and are expected to sustain momentum in the near term. Even with our optimism, we'll continue to follow the guidance of our system and rotate out of such names as required as well as continue executing on tax strategies to minimize overexposure risks.

This update expresses the views of the author(s) as of the date indicated and such views are subject to change without notice. Even Herd has no duty or obligation to update the information contained herein. Further, no representation has been made, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss. This information is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Even Herd believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Even Herd made attempts to show sources and links to that data, when possible. However, Even Herd cannot guarantee or be held liable when accessing those links, as it is not the property of or maintained by the author(s). This update, including the information contained herein, may not be copied, reproduced, republished, or posted in whole or in part, in any form without the prior written consent of Even Herd.