Essex Global Environmental Opportunities Strategy (GEOS)
Second Quarter ended June 30, 2025
We believe that an important attribute for portfolio management is objective technology assessment as we research potential industries and companies during the Essex Global Environmental Opportunities Strategy (GEOS) investment process. Our portfolio management process considers many factors for technology assessment, from a path to commercial viability and profitability, to the state of legacy technology and regulatory outlooks. Objectivity is paramount, enabling industry and stock selection without bias and frequently against consensus, leading to enhanced long-term growth opportunities. Currently, we think investors have an irrational bias against clean technology, overly influenced by sensationalized headlines which has led to massive negative sentiment. It makes no sense to fawn over artificial intelligence (AI), data centers and nuclear power, while disparaging segments of clean technology such as electric grid infrastructure and solar power. Each of these industries is tied to the same catalyst – the urgent need for more power for the global economy. There is no way nuclear power and solar power are not directly related. We would even argue that solar and battery storage are better positioned at this time, given greater growth potential based on lower relative cost and faster dispatchability. But know that GEOS has exposures to all these referenced technologies and services.
Clean tech cannot be shunned – it is a critical solution to the trends of our time, from the call for enhanced power transmission to the immediate need for data center power. We believe recent clean technology negative sentiment coupled with enhanced drivers for our GEOS thesis exemplifies early innings in a clean tech recovery. Recent sensationalized headlines and market commentary connote a direct relationship between government incentives and clean tech growth. Government incentives are a driver for growth, but far from the most important driver. Clean technology enables enhanced social wellbeing and economic growth with less resources. As we have stated often and consistently, we invest in commercially viable clean technology that can be disruptive or enhance existing technologies without primary fundamentals predicated on government policy. Disruptive technology does not care who is in Washington.
Quarterly Performance and Summary
During the second quarter of 2025 ending June 30, the Essex Global Environmental Opportunities Strategy (GEOS) returned 16.55% (16.27% net), versus 10.96% for the MSCI World Index without income (Index). The Wilderhill Clean Energy Index[1] posted 26.52% for the second quarter. For the year-to-date ended June 30, GEOS returned 7.88% (7.34% net) versus 8.59% for the Index and -0.89% for the Wilderhill.
GEOS had solid performance from lidar solutions firm Ouster, which was up 170% for the quarter, as the market recognized adoption which is occurring initially for smart city intersections, and industrial automation. Long-term power technology holding American Superconductor (AMSC) returned over 100%, based on solid order growth from the US and Canadian Navies for ship mine and surveillance abatement, as well as improvements in wind and their grid harmonization businesses. AMSC is a great example of a company that will benefit from data centers and manufacturing onshoring – both segments require high quality, consistent power applications such as offered by AMSC. GE Vernova (GEV) also had strong performance, reflective of their gas turbine generation business which is booked out through 2028. Note, regarding our introductory comments, that GEV is a leader across several energy sources, including wind power and traditional as well as small form nuclear. Underperformance for the second quarter was led by long-term GEOS water holding Energy Recovery (ERII), down 19.6% after announcing some pushouts for Middle Eastern desalination projects. These projects are still in the pipeline, and we continue to hold ERII based on their dominant market share providing energy saving pressure devices to the desalination market. Recent purchase Copart experienced weak quarterly performance, which we believe was driven by the market moving to higher growth securities. Copart is the largest reseller of salvage vehicles, used for automotive parts, and we believe well positioned as the value of used cars increases given the consumer spending cycle and skyrocketing new car prices. Generac Holdings was a weak performer for GEOS and was sold in April to fund the Copart purchase.
Several positions that have performed well were trimmed during the quarter to add to existing positions which we believe are better positioned from a valuation and growth perspective. GE Vernova and Valmont Industries were trimmed to add to vision systems firm Cognex, advanced electric meter company Landis+Gyr and leading Chinese EV manufacturer BYD. Chart Industries and Hannon Armstrong were sold to purchase three new positions:
Amprius Technologies, manufacturer of silicone anode batteries providing enhanced battery performance.
Onsemi, providing silicon carbide devices and sensors for industrial automation, automotive and power.
Samsara is a central hub, using AI and machine learning for managing physical operations for efficiency.
Outlook
We mentioned in the introduction the enhanced drivers for the GEOS thesis. We believe that companies providing environmental solutions can catalyze progress, from social to economic and for our world. There are several important drivers that have been in the headlines lately, from the need for data center power to public infrastructure resiliency in the face of increasingly catastrophic storms. Global geopolitical stress places a premium on domestic energy sources, and a full palate of solutions is an economic competitive advantage. Additional drivers are extensive, from the global water crisis amidst drought and excessive rainfall, to the immediate need to enhance agricultural crop productivity. GEOS has direct exposure to companies providing solutions to these challenges, and many more.
Currently, clean technology stocks are in recovery mode, but we still sense skepticism amidst investors. There are very attractive values to be had within our proprietary, global clean technology universe. We believe our best thinking and research is presented within the current GEOS portfolio. The hurdles thrown the sector’s direction have illustrated the competitive advantage for management teams that can navigate risks and uncertainties from Inflation Reduction Act rollbacks to opaque tariff directives from Washington. The economic cycle has firmed in the past few years to boot, placing a premium on capital stewardship, as the free lunches are gone with low rates and cheap capital. This is all beneficial, as success in this market can be measured now based on pure corporate fundamentals and research evaluation. We strongly believe clean technology will be the greatest investment megatrend in coming years, and recommend investors view the sector objectively, examining the growth trends and the solutions. Most of these solutions are not readily apparent, such as battery cathodes, silicon carbide, or grid management systems. It does take time for opportunities and value to be recognized by the market, especially for smaller market capitalization companies as the tide turns in market leadership.
Disclosures:
This commentary is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. The opinions and analyses expressed in this commentary are based on Essex Investment Management LLC’s (“Essex”) research and professional experience and are expressed as of the date of its release. Certain information expressed represents an assessment at a specific point in time and is not intended to be a forecast or guarantee of future results, nor is intended to speak to any future periods. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.
This does not constitute an offer to sell or the solicitation of an offer to purchase any security or investment product, nor does it constitute a recommendation to invest in any particular security. An investment in securities is speculative and involves a high degree of risk and could result in the loss of all or a substantial portion of the amount invested. There can be no assurance that the strategy described herein will meet its objectives generally or avoid losses. Essex makes no warranty or representation, expressed or implied; nor does Essex accept any liability, with respect to the information and data set forth herein, and Essex specifically disclaims any duty to update any of the information and data contained in the commentary. This information and data does not constitute legal, tax, account, investment or other professional advice. Essex being registered by the SEC does not imply a certain level of skill or training.
[1] The Wilderhill Clean Energy Index (ticker: ECO) is a modified equal dollar weighted index comprised of publicly traded companies whose businesses stand to benefit from societal transition toward the use of cleaner energy and conservation.
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