EHLS: Steady through a Choppy June

The first half of 2026 closed with the fund at +14.14% (MKT) year-to-date, continuing to outpace the S&P 500 at +9.55% and the S&P 500 Equal Weight at +11.11%. June was a modest give-back month for the fund, roughly flat, as the broader market snapped a two-month winning streak and mega-cap technology came under pressure. The S&P 500 declined approximately -1.1% for the month, its first negative month since March, while narrow AI-linked leadership gave way to broader participation. That rotation played to the portfolio’s strengths in some areas and against it in others, but our sector hierarchy remained intact and our relative outperformance held.

Diversification across clusters, industries, and individual securities remains central to portfolio construction and is guided by our proprietary system. Energy, Materials, and Utilities continue to anchor the portfolio and, as we anticipated in last month’s update, all three remain firmly at the top of the system.

IN THIS UPDATE

• The fund ended the first half at +14.14% (MKT) year-to-date, ahead of the S&P 500 at +9.55% and the S&P 500 Equal Weight at +11.11%.

• Energy, Materials, and Utilities continue to lead the system, matching our expectations from last month.

• Consumer Discretionary remains firmly at the back of the rankings.

• The Israel-Iran ceasefire in early June introduced meaningful volatility, particularly across energy markets, without changing the fund’s core positioning.

• Health Care and Real Estate strengthened during the month, delivering notable long contributions and validating the improving trends we flagged in prior updates.

• Mega-cap technology repriced meaningfully in the back half of June, reinforcing the differentiated return profile the fund’s lighter exposure to that group creates.

LOOKING BACK

ENERGY, MATERIALS, AND UTILITIES HOLD THE TOP

Energy, Materials, and Utilities all remained in the top tier of the system through June, exactly as anticipated in last month’s update. There has been no meaningful threat to their leadership from the rest of the ranking, and we continue to expect that positioning to hold into the coming month.

Within Energy, the portfolio remained anchored around midstream, offshore, and shipping, though June was a more challenging environment for the group. The Israel-Iran ceasefire announced early in the month sent oil prices sharply lower, with Brent falling roughly 8% on the week the ceasefire took hold. Some of that reversed intra-month when strikes briefly resumed on June 7-8 before the ceasefire took full hold, but the trend for the month was clearly a normalization of the geopolitical premium. TechnipFMC (FTI) consolidated roughly -5% during the month after its strong run, and several energy service names traded lower. Even so, exposure across the sector remains meaningful, and the system continues to support the positioning. The system did execute exits during the month in NRG Energy (NRG), Weatherford International (WFRD), and Cameco (CCJ) as their respective rankings deteriorated.

Materials strength was more mixed in June. Carpenter Technology (CRS) added roughly +29% in the month, extending its run as a top contributor and reinforcing the specialty metals theme within the cluster. On the other hand, some of the precious metals miners took a breather, with Alamos Gold (AGI) giving back roughly -25% and select copper and aluminum names underperforming. The mining cluster remains diversified across gold, copper, uranium, and specialty metals, and the system continues to support broad exposure.

Utilities delivered meaningful contribution during the month. Entergy (ETR) added roughly +7%, Enlight Renewable Energy (ENLT) was volatile but the broader utility complex held up well as investors rotated toward defensive infrastructure exposure. The sector continues to benefit from the durable AI power demand narrative even as the mega-cap technology beneficiaries of that spending faced pressure.

HEALTH CARE AND REAL ESTATE DELIVER

Two of the sectors we flagged in last month’s update as showing improving trends, Health Care and Real Estate, delivered on that thesis in June.

Health Care was one of the strongest sectors in the market during the month, and the fund benefited materially. Guardant Health (GH) added roughly +19%, extending its move and becoming one of the largest positions in the portfolio. Cardinal Health (CAH) added +20%, Amneal Pharmaceuticals (AMRX) added +31%, and several specialty biotech names, including Protagonist Therapeutics (PTGX), Krystal Biotech (KRYS), Mirum Pharmaceuticals (MIRM), and Liquidia (LQDA), each gained 20% or more during the month. The system’s earlier signals in Health Care compounded meaningfully.

Real Estate delivered similarly strong contributions. Diversified Healthcare Trust (DHC) added roughly +16% during the month and now sits as the fund’s largest single position. Postal Realty Trust (PSTL) added +8%, and Welltower (WELL) added +11%. The rotation toward real assets, defensive yield, and rate-sensitive sectors that began in May accelerated through June. The system continues to signal further improvement in the sector, and we expect Real Estate to remain a meaningful allocation.

CONSUMER DISCRETIONARY REMAINS AT THE BACK

Consumer Discretionary stayed in last place throughout June, consistent with the position it has held for several months now. The short book in this space continues to work well, and during June the system opened several new short positions in cyclical and consumer-facing names including Lululemon Athletica (LULU), Floor & Decor Holdings (FND), and Inspire Medical Systems (INSP). The broader Consumer Discretionary and homebuilder complex has not shown any meaningful improvement in relative rankings, and we do not anticipate a change in that stance heading into July.

MEGA-CAP TECHNOLOGY FACES PRESSURE

June saw a notable shift in market leadership away from the mega-cap technology names that had driven so much of the year’s index performance. The Nasdaq Composite (an index of nearly all stocks listed on the Nasdaq exchange) fell roughly -2.8% for the month, its worst month since March, with a particularly sharp drawdown on June 23 when Information Technology fell approximately -3.6% on a single day. Enterprise software, IT services, and select mega-cap names bore the brunt of the selling.

This is a dynamic we flagged in last month’s update. As a reminder, the Magnificent Seven (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla) collectively represent roughly ten times the weight in the S&P 500 that they do in our portfolio, with fund exposure held in only two of the seven names. That gap in exposure widened further during the month as the system exited our position in Nvidia (NVDA) on deteriorating relative strength, leaving Alphabet (GOOGL) as the fund’s only remaining direct Magnificent Seven exposure. The rotation away from concentrated mega-cap tech that we discussed conceptually in last month’s update materialized meaningfully in June, and the fund’s positioning was well-suited to the shift.

AI SEMICONDUCTORS: THE DIVERGENCE WIDENED

The AI-linked semiconductor cluster we discussed at length in last month’s update saw meaningful divergence in June. Lam Research (LRCX) added roughly +29% during the month, continuing to benefit from capital equipment demand tied to memory. In contrast, several other semi and hardware names traded lower, with AXT (AXTI) giving back roughly -31% and KLA Corp (KLAC) trading materially lower on what appears to be a corporate action. Our continued cautious trimming and diversification approach in this pocket, which we discussed at length in last month’s update, allowed the portfolio to weather the divergence without meaningful damage. The volatility that has characterized this cluster remains present, and we continue to manage exposure accordingly.

LOOKING FORWARD

A quick note, we will be moving to quarterly updates in order to provide investors with longer term views of the fund while volatility remains low.

SECTOR POSITIONING

Heading into July, the sector hierarchy remains largely as it was:

• Energy and Materials continue to anchor the top of the system alongside Utilities. No meaningful threat to their leadership is evident.

• Health Care and Real Estate have moved firmly into the upper half of the system after strong June performance, and we expect exposure in both to remain meaningful.

• Industrials continue to hold their second-tier position, supported by the AI infrastructure and defense build-out narratives.

• Financials remain in the top half but continue to show gradual deterioration in relative rankings.

• Communication Services and Consumer Staples remain areas we are watching for continued improvement.

• Consumer Discretionary stays firmly at the back of the system, with meaningful new short exposure added during June.

NET EXPOSURE INCREASED MODESTLY

The fund’s net equity exposure moved higher during June, ending the month near the top end of our expected range as short covers exceeded new short opens. The system continues to identify strong long opportunities across the sectors it favors, while the pool of high-conviction short candidates has narrowed somewhat as the market’s rotation broadened participation. We would expect net exposure to remain elevated relative to where it sat earlier in the spring, though within our normal operating range.

HALF-YEAR REFLECTIONS

The first half of 2026 produced meaningful outperformance for the fund against both the cap-weighted and equal-weighted S&P 500. It is worth acknowledging that the gap has narrowed as the market has broadened, particularly against the equal-weighted index, which is doing exactly what an equal-weighted benchmark does when leadership shifts away from the largest names. That is a healthy development for the market overall and consistent with our thesis that concentrated mega-cap exposure creates a fragility that eventually gets tested.

We continue to run the portfolio the same way we have all year: follow the system, stay diversified, trim into strength, and let the strongest themes compound. The environment ahead may look different from the one we just navigated, but the approach does not change.

As always, the system, not our opinion, will dictate positioning. We continue to stay diversified, manage exposure thoughtfully, and let the strongest themes compound while cutting positions when rankings deteriorate.

The Even Herd Long Short ETF (EHLS) is a relative momentum-driven long/short equity strategy. For more information, visit evenherd.com/ehls.