ISSUE #7: June 24, 2018
Geothermal has long been one of the more efficient methods of heating and cooling homes around the world. The challenge with geothermal, as is the case with many newer technologies, has been the upfront cost of the system versus a traditional gas or oil fired heating system. Some companies like WaterFurnace (acquired by Swedish company NIBE in 2014) have had some success in North America, but residential geothermal largely has remained a niche business. Dandelion Energy, a spinoff of Alphabet’s Moonshot Factory, is seeking to change the market by making it cheaper, faster and easier to install residential geothermal systems. If successful, this could fundamentally change the residential heating/cooling market.
Finally in Bloom?
Bloom Energy, a manufacturer of fuel cells for distributed energy generation and one of the better-funded clean energy startups, has filed registration documents with the SEC for an upcoming IPO. It’s been a long time coming for Bloom Energy which has received VC funding of around $1.5 billion and operated in Apple-like secrecy for its first decade before a high-profile product debut in 2010, at which time backer John Doerr (of Kleiner Perkins) proclaimed that Bloom Energy could be the next Google. That hasn’t quite happened. While the company has had some high-profile wins from customers such as AT&T, Home Depot and Walmart among others, profitability has been elusive with an accumulated deficit of more than $2 billion. And, as stated by the company in the S-1, losses are expected to continue for the “foreseeable future.” As we have commented before, profitability in the fuel cell industry is near non-existent. Provided that this IPO is successful (after a couple of previously aborted attempts), this will be an interesting company to watch.
Just Two Words…Plastics Fuel
As Mr. McGuire told recent college graduate Benjamin Braddock (played by Dustin Hoffman) in the movie The Graduate, “There’s a great future in plastics.” That may have been the case several decades ago, but plastic waste has become an environmental nightmare throughout the world, clogging our oceans and overwhelming our landfills. One Norwegian startup, Quantafuel AS, is hoping to help change this by recycling plastic and turning this waste stream into diesel fuel. While we are not particularly enthused about the end product, it is encouraging to see that someone is finding a way to dispose of plastic waste while also significantly reducing the carbon output of the diesel manufacturing process.
I’m in an Energy Storage State of Mind
Last week, New York Governor Cuomo put a major stake in the ground in support of energy storage. The Governor’s goal is a target of 1,500 megawatts of energy storage by 2025, a substantial goal as the deployments-to-date as of 2017 equated to 1,173 megawatts globally. As battery prices continue to decline, we believe the stationary storage market to be an increasingly important segment of the storage market alongside electric vehicles. Grid storage, used in concert with renewables will be the category killer for coal and even natural gas-fed baseload electricity.
Climate change is an extremely complex problem, with relevance and effects that have been measured and communicated with limited success to the public. Given the vastness of climate change, and variability of impacts globally, it is hard to find effective message branding to refine urgency and education. 350.org represents in our minds a successful effort to bring science to relevant education and action. Last week, during the summer solstice, 100 meteorologists united to wear ties while broadcasting, showing the work of Ed Hawkins, a climate scientist at the University of Reading, England, using the Twitter hashtag #metsunite. Hawkins’ work graphically portrays in artistic fashion the annual temperatures since 1850 compared to the average. The blue colors of the 19th century migrate to the red colors of recent decades. We ordered a tie, and look forward to wearing this article of climate education:
You should carefully consider the Fund's investment objectives, risks and charges and expenses before investing. This and other important information is contained in the Fund's prospectus and summary prospectus, which should be read carefully before investing. To obtain a fund prospectus or summary prospectus, call (800) 700-9929. The Fund is distributed by Ultimus Fund Distributors, LLC.
Investing involves risk, including loss of principal. There is no guarantee that the fund will meet its investment objective. Because the Adviser's GEOS criteria exclude securities of certain issuers for non-financial reasons, the Fund may forego some market opportunities available to funds that do not follow the environmental themes inherent in the GEOS strategy.
As of 3/31/18, the Fund's top ten holdings are FANUC CORP (4.18%), Philips Lighting NC (4.11%), Xylem, Inc. (3.93%), Keyence Corp. (3.37%), TPI Composites, Inc. (3.54%), Umicore SA (3.32%), Sensata Technologies Holding NV (3.22%), Kornit Digital, Ltd. (3.10%), Raven Industries, Inc. (3.01%), and Itron Inc. (2.97%)
The opinions and analyses expressed in this newsletter are based on Essex Investment Management Company, LLC’s (“Essex”) research and professional experience, and are expressed as of the date of our mailing. Certain information expressed represents Essex’s opinion and assessment at a specific point in time and is not intended to be a forecast or guarantee of future results, nor is it intended to speak to any future periods. Essex makes no warranty or representation, express 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 herein.
This newsletter is for informational purposes only and 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. Any individual securities listed herein do not currently represent any securities purchased, sold, or recommended to clients.
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. The reader should not assume that investments in the securities described were or will be profitable. Past performance is not indicative of future results.
The information and data in this newsletter does not constitute legal, tax, accounting, investment or other professional advice. Certain information contained herein has been obtained from third party sources and such information has not been independently verified by Essex. No representation, warranty, or undertaking, expressed or implied, is given to the accuracy or completeness of such third party information
Any projections, market outlooks or estimates contained herein are forward-looking statements and are based upon certain assumptions. Other events which were not taken into account may occur. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events.