Essex Global Environmental Opportunities Strategy (GEOS)
Third Quarter ended September 30, 2025
“Headlines, in a way, are what mislead you because bad news is a headline, and gradual improvement is not.” – Bill Gates
The Essex Global Environmental Opportunities Strategy (GEOS) had another successful quarter for 2025. We believe that while we are very early on in the clean technology (clean tech) recovery, vastly improved fundamentals are driving early innings positive equity price performance. Despite continued negative headlines for the clean tech sector, we are having generally very positive conversations with the management teams of current, and potential GEOS holdings. On the heels of a positive earnings season for the second quarter, and as we approach third quarter earnings reports, we want to continue to reinforce that business fundamentals are what drive stock price appreciation in the long run, not conjecture nor sensationalism. We strongly believe that profitable, commercially viable and disruptive technologies that enable productivity will always win and take share because they improve the quality of life as well as economic growth. Government policy does not drive or mandate economic growth – innovation does. Policy is not the sole determinant of business models, progress or stock price performance – fundamentals are. The fundamentals of clean tech are not only intact but unfolding in more positive directions based on business traits, not policy. Commercially viable disruptors will profit and win given the major drivers growing in the clean tech and new energy transition, from growing demand for power, to the urgent need for manufacturing productivity.
Quarterly Performance and Summary
During the third quarter of 2025 ending September 30, the Essex Global Environmental Opportunities Strategy (GEOS) returned 14.27% (14.00% net), versus 7.19% for the iShares MSCI World ETF (URTH). The Wilderhill Clean Energy Index[1] posted 44.75% for the third quarter. For the year-to-date ended September 30, GEOS returned 23.27% (22.37% net) versus 17.65% for URTH and 43.62% for the Wilderhill.
GEOS performance for the third quarter was led by battery technology holding Amprius Technologies (AMPX), which rallied 150% on design wins for electric vertical takeoff and landing aircrafts (eVTOLs) and drones, because of their superior battery density and low weight. AMPX is expanding their manufacturing capacity given new customer wins and raised revenue guidance for 2025. Amprius was trimmed in August given this significant stock price appreciation. Aehr Test Systems (AEHR) is a new GEOS holding, purchased early in July, and was a top performer given order growth and raised revenue guidance for their test equipment for semiconductor integrated circuits. We believe the largest driver of growth for AEHR is increased industry adoption of silicon carbide (SiC), a more efficient substrate increasing power density and performance for applications such as battery storage and data centers. MP Materials (MP) was a top performer for the Strategy, as rare earth resources were finally recognized as a national security asset by our government, leading to a direct investment from the Defense Department. GEOS has held MP since late 2020, and we added to the position on weakness in 2021 and trimmed several times as the stock rallied this spring and summer. We exited MP fully in late August given our overvaluation assessment versus our target price. Power technology holding Primoris Services (PRIM) was a top performer on continued enthusiasm regarding the demand and supply imbalances for our electrical grid. Given this increased power demand, and the fact that utility scale solar is the most dispatchable form of power currently, Primoris has over 25 active solar projects with sizes over 340 MW versus 280 MW a year ago.
For the underperformers, stalwart long-term holding Badger Meter (BMI) experienced some weak stock performance after a second quarter earnings report that missed consensus given the timing of some large, advanced water meter projects. We trimmed BMI in the spring due to its strong performance over the past year and recognize its strong differentiation as advanced meters are a spending priority for utilities given water shortages and the need to abate non-revenue water. Water holdings have been very strong performers for GEOS the past few years, yet Kurita Water Industries, the Japanese water treatment and management company also had weak stock performance for the recent quarter after announcing some declines in order volumes. We are constructive on Kurita, given its consistent growth, profitability and believe it will be a continued beneficiary of economic growth improvements in Japan. We purchased the shares of Kornit Digital (KRNT) in early August after a 27% stock price correction on a weak earnings report reflecting the timing of some large shipments. The equity shares for Kornit have been trading since our purchase about $14, with $11 of share value in cash. We have a positive outlook on the Kornit business, enabling garment screen printing with environmentally friendly, non-PFAS inks and no use of water – important in an extremely toxic industy. Rounding out the underperformers is China-based BYD, the leading global electric vehicle (EV) manufacturer. Sentiment on BYD and other Chinese EV companies soured during the quarter given what we believe to be short lived pricing pressure in China. BYD is aggressively expanding and taking share in Europe and India, and is also scaling an impressive stationary battery storage business.
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. American Superconductor (AMSC) was trimmed a few times during the third quarter, as was GE Vernova (GEV). We increased Strategy weight in asset tracking firm Samsara (IOT) and continued to add to factory automation and vision system holding Cognex (CGNX). IDEX (IEX) and Ouster (OUST) were sold, and 4 new positions were added:
Aeva Technologies (AEVA), offering 4D LiDAR measuring velocity and position for broad applications.
Fluence Energy (FLNC), providing battery storage systems for industrial and utility usage.
NEXTracker (NXT), manufacturer of tracking devices increasing utility scale solar productivity.
Proto Labs (PRLB) is a digital manufacturing company providing rapid production across markets.
Outlook
While we have been consistently communicating the important weight in the GEOS power technology theme, the largest weight currently is cleantech & efficiency, representing almost 25% of the Strategy. This theme includes advanced insulation with long-term holding Kingspan Group, to industrial productivity firms such as KION Group, providing supply chain optimization to warehouses and manufacturing plants. This theme is the very essence of our definition of clean tech – doing more with less, and the catalysts are varied and growing. From labor shortages to aged demographics and high labor turnover in e-commerce fulfillment centers and warehouses (over 100% per annum), to the prospects for increased domestic manufacturing – companies need solutions to enhance returns through productivity investments. KION solutions provide up to a 40% increase in throughput capacity, and a 20% increase in labor productivity. KION’s electric forklifts can achieve 30% more handing capacity than legacy models with 30% energy savings. Industrial optimization solutions provide strong return on investment for customers, as increased productivity with less resources saves money and lessens business risks. Keyence is a factory automation firm focused on sensors and controls to optimize manufacturing processes while enhancing worker safety. Keyence provides sensors and flow controls coupled with data analysis and predictive machine learning to assess water management within a plant, for example. Another Keyence application provides flow sensors for compressed air use in manufacturing plants, signaling and fixing dangerous and expensive energy intensive leaks. Optimizing compressor usage in a manufacturing plant has strong returns, in dollar terms, environmental measures by limiting CO2, and most importantly, increasing worker safety. Monitoring flow rates and levels prevents waste while allowing for equipment usage optimization like pumps and fans, which are also energy intensive. Cooling towers, used in industry and data centers have implemented Keyence flow meters to calibrate water flow rates and fan speeds to achieve optimal and efficient heat transfer, lowering energy costs. The GEOS cleantech & efficiency theme is key to optimizing resource use, driving productivity gains, and enhancing social goals such as worker safety.
In this period of general skepticism for clean tech, driven by headlines, we are more optimistic than we have been in years. The examples given above are not in the headlines, and are in some cases esoteric, but they are just as important to our economy as semiconductors, and we believe will be recognized by the market in time. Please recall GEOS has eight other themes, from water to renewable energy where we are equally constructive. Cleantech enables economic growth with less resources. Where we see environmental challenges globally, we see great investment opportunity.
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.