Evermore Global Advisors, an investment management firm, published its “Evermore Global Value Fund” fourth quarter 2020 investor letter – a copy of which can be downloaded here. A return of 13.85% was recorded by the Institutional Class shares of the Evermore Global Value Fund (“EVGIX”) for the year end of 2020, outperforming its S&P 500 benchmark that delivered a 12.2% return, but slightly below its MSCI Europe index that delivered a 15.6% gain in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Evermore Global Advisors, in their Q4 2020 investor letter, mentioned Eos Energy Enterprises, Inc. (NASDAQ: EOSE) and shared their insights on the company. Eos Energy Enterprises, Inc. is a New Jersey-based storage battery manufacturing company that currently has an $878.6 million market capitalization. Since the beginning of the year, EOSE delivered a -18.62% return, while its 3-month gains are also down by -26.68%. As of April 07, 2021, the stock closed at $16.96 per share.
Here is what Evermore Global Advisors has to say about Eos Energy Enterprises, Inc. in their Q4 2020 investor letter:
“Eos Energy Enterprises, Inc. (Country: U.S.; Ticker: EOSE US) is a $1.2 billion market capitalization (on a fully diluted share count basis) designer and manufacturer of stationary, large-scale, and modular zinc-based battery systems sold to electric utilities, power producers, and industrial energy end users. Its batteries are predominantly used to store renewable power generated during low demand “off-peak” hours, and discharge at times of higher demand and/or elevated spot electricity prices. Secondarily, in areas with unreliable grids or grids that are prone to rolling brownouts (as California has been experiencing), Eos solutions can provide uninterrupted backup power supply for industrial customers. Based in Edison, New Jersey, the company came to market in November 2020 via its merger into a special purpose acquisition company (or “SPAC”), B. Riley Principal Merger Corp. II (old ticker: BMRG US), in a deal that left Eos with approximately $130 million of net cash.
Until now, the small installed base of grid storage battery capacity in the U.S. has utilized lithium-ion batteries, with technology largely piggybacking off developments made for electric vehicle applications. But given the risks of fire in high temperature climates among other drawbacks (including supply chain fragility/complexity, and difficulty in end-of-life battery recyclability), lithium-ion has proven to be technologically challenging for grid storage applications, keeping a lid on the pace of deployments. Zinc-based chemistry on the other hand, like that found in the Eos Aurora solution, can operate in much wider temperature ranges than lithium-ion, with no practical risk of fire. Eos also offers a fully domestic supply chain, better recyclability, and a slower discharge rate. As a result, despite lithium-ion’s clear advantages in certain important metrics like density and round-trip-efficiency, its specific drawbacks mean that in a number of applications (or regions) Eos’ offerings ultimately yield a lower total cost of ownership to its customers.
Eos has a solid first-to-commercialize advantage within its zinc chemistry niche. We expect this, along with an extremely efficient “build as we need it” approach to manufacturing capacity, has potential to translate to a leading market share within a rapidly growing field. Global energy consultancy, Wood Mackenzie, for instance, projects 31% annual growth in deployed battery storage systems over the next decade, reaching 740 GWh installed capacity globally by 2030. While the company is in the very early stages of its revenue ramp, its sales pipeline and backlog are growing steadily. With over 130 active engagements on potential projects, Eos has disclosed that at the end of 2020 it had an opportunity pipeline of over $3 billion. At the time of its merger into the SPAC, Eos projected it would generate $50 million and $269 million in revenue for 2021 and 2022, respectively. We believe the company will comfortably exceed these levels given the pace of revenue conversion and pipeline growth it has experienced since the completion of the merger. Grid storage batteries are sold with multi-year warranties. Thus, we believe the very act of going public (complete with a bolstered balance sheet, audited financials, and a “brand name”) has helped assuage concerns of customers that might otherwise be reluctant to enter into long term agreements.
Shares of Eos have been a phenomenal performer in the short period the Fund has owned them, having appreciated by more than 100% at year-end. With such high rates of revenue growth (management expects annual topline growth of nearly 400% through 2024 in its Base Case projection), admittedly it is difficult to value the business with a high degree of precision. However, based on our expectations, the Fund paid no more than 3x 2024 projected EBITDA for what we expect to be a fast-growing, and politically popular industry.”
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Our calculations show that Eos Energy Enterprises, Inc. (NASDAQ: EOSE) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Eos Energy Enterprises, Inc. was in 10 hedge fund portfolios, compared to 14 funds in the third quarter. EOSE delivered a -2.19% return in the past month.
The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
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Disclosure: None. This article is originally published at Insider Monkey.
