EHLS: Volatility Continues
- sam00070
- 1 day ago
- 5 min read
IN NOVEMBER
EHLS delivered slightly negative performance in November accentuated by elevated volatility in several themes but still strongly outperforming the S&P 500 Equal Weight Index, an index that equally weights the components of the S&P 500, since the August 2024 lows. The fund benefited from continued leadership in precious metals mining and select AI-related infrastructure names, while our proprietary momentum system forced disciplined trims and exits that helped contain larger drawdowns during mid-month gyrations.
At month-end, the top 10 holdings represented just 14.6% of the portfolio (versus ~40% for the S&P 500’s top 10), and net equity exposure finished at approximately 67%, very close to where we expect to remain heading into December.
IN THIS UPDATE
Precious metals mining widened its lead as the strongest cluster in the system with the gap versus the next-best sector now among the largest we have seen in recent history.
AI-related names experienced violent swings; we used the volatility to trim concentration.
Financials continue their slow-motion relative decline, but the pace has moderated; Utilities and Materials remain firmly in the top three sector rankings.
Consumer Staples and Real Estate stay deeply out of favor, with continued difficulty finding long exposure and only very selective shorts.
Our internal “sea-level” breadth indicator reached a new cycle low in November, removing any near-term systemic risk flags and supporting the constructive market posture with optimism still in the forefront.
LOOKING BACK
November was a tale of two very different volatility regimes inside the portfolio.
The precious metals mining cluster, already the clear leader since May, put even more distance between itself and everything else. Portfolio names such as Kinross Gold (KGC), Agnico Eagle (AEM), Skeena (SKE), Perpetua (PPTA), and Alamos Gold (AGI) posted strong gains with relatively contained drawdowns, although continued volatility was seen in names with rare earth exposures. This remains an area of strength for the fund.
The AI complex, by contrast, delivered some of the largest swings we have seen since February/March. A “neo-cloud” play that we no longer own (e.g., the IREN position we fully redeemed in October) moved ~50% peak-to-trough in a matter of weeks. The crypto space is witnessing some severe price swings, and companies like Robinhood (HOOD), which has some crypto adjacency, saw 30%+ air pockets and a much smaller position, Coinbase (COIN) that witnessed over 40% swing from October highs.
Spotify (SPOT) was a forced exit last month, not because of fundamental concerns, but purely because it rolled out of the top tier of the system. We continue to like the story and will monitor for re-entry. Mega-cap technology remained supportive. Alphabet (GOOGL) powered higher on the Gemini 3 announcement and remains one of the most diversified direct AI plays we own. Tesla (TSLA) continues to exhibit extreme volatility but is still comfortably inside the model, and we continue to hold it, along with Palantir (PLTR) and Nvidia (NVDA) which continue to rank in the top 10% of the stocks we track and are maintained as holdings. Meta (META) also remains a holding for now, but it is teetering near levels that could see a forced exit in December.
Financials weakened further, especially insurance and select regionals, but the deterioration has slowed versus prior months. Consumer Staples and Real Estate posted negligible moves and remain the laggard sectors with the least portfolio exposure.
LOOKING FORWARD
The precious metals mining cluster has rarely been this dominant. Absent a major reversal in relative momentum, we expect names such as Kinross Gold (KGC, currently the largest mining weight at ~1.64%), Agnico Eagle (AEM), Skeena (SKE), and the junior developers to remain core holdings. We will continue to let winners run but look to avoid individual-position concentration by redeeming and diversifying into other names if deemed necessary.
AI infrastructure remains a structural multi-year boom in our view, but we are now even more disciplined about volatility and concentration. Solaris Energy Infrastructure (SEI), uniquely positioned at the power-bottleneck intersection of hyperscaler build-out and announcing recent deals with xAI, is the only position currently weighted north of 1.8%. We will not hesitate to pare or exit entirely if individual names begin to meaningfully decline within the system, regardless of how compelling we believe the fundamental story appears.
For Financials, we maintain as a top net weighting as it still has not deteriorated below other neighboring sectors, but we are not pressing the trade aggressively to determine whether the decline for the sector’s ranking will continue into the new year, unelss we see the decline to begin accelerating again. Utilities, strength driven by Independent Power Producers, and Materials, benefiting from the robust strength in precious metals, should keep firm further on relative strength.
Our “sea-level” breadth indicator in the system is at recent lows, historically a condition that has preceded constructive market periods rather than any imminent danger. Accordingly, we expect to carry roughly 65–70% net equity exposure into December and likely into the new year, barring a material shift in the momentum regime. A movement higher in this indicator would force the fund to shed longs or increase gross short exposure, which we do not see as likely at the present moment, but this could change.
As always, the system, not driven by our opinion, will dictate position exits. Our job is to stay diversified, respect volatility, and let the highest-conviction themes compound while cutting exposure when rankings deteriorate.
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