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Hedge Funds Aren’t Crazy About Covanta Holding Corporation (CVA) Anymore

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Covanta Holding Corporation (NYSE:CVA) has experienced a decrease in support from the world’s most elite money managers lately.

According to most market participants, hedge funds are perceived as slow, outdated investment tools of yesteryear. While there are greater than 8000 funds with their doors open today, we at Insider Monkey choose to focus on the masters of this group, about 450 funds. It is widely believed that this group controls most of the hedge fund industry’s total asset base, and by monitoring their highest performing stock picks, we have discovered a number of investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as key, positive insider trading sentiment is a second way to break down the world of equities. There are many incentives for an upper level exec to downsize shares of his or her company, but just one, very simple reason why they would behave bullishly. Several academic studies have demonstrated the valuable potential of this tactic if you know what to do (learn more here).

Now, we’re going to take a look at the recent action surrounding Covanta Holding Corporation (NYSE:CVA).


What have hedge funds been doing with Covanta Holding Corporation (NYSE:CVA)?

At Q1’s end, a total of 19 of the hedge funds we track were long in this stock, a change of -17% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly.

According to our comprehensive database, Third Avenue Management, managed by Martin Whitman, holds the largest position in Covanta Holding Corporation (NYSE:CVA). Third Avenue Management has a $158.9 million position in the stock, comprising 3.1% of its 13F portfolio. The second largest stake is held by David Cohen and Harold Levy of Iridian Asset Management, with a $67.5 million position; 1% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Glenn J. Krevlin’s Glenhill Advisors, John A. Levin’s Levin Capital Strategies and Eliav Assouline and Marc Andersen’s Axial Capital.

Due to the fact that Covanta Holding Corporation (NYSE:CVA) has faced falling interest from the smart money, we can see that there exists a select few money managers that slashed their full holdings at the end of the first quarter. Interestingly, Edward Goodnow’s Goodnow Investment Group said goodbye to the biggest stake of all the hedgies we track, worth close to $4.9 million in stock.. Philip Hempleman’s fund, Ardsley Partners, also cut its stock, about $2.3 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 4 funds at the end of the first quarter.

What have insiders been doing with Covanta Holding Corporation (NYSE:CVA)?

Insider purchases made by high-level executives is most useful when the company in focus has experienced transactions within the past 180 days. Over the last six-month time frame, Covanta Holding Corporation (NYSE:CVA) has experienced zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Covanta Holding Corporation (NYSE:CVA). These stocks are Heckmann Corporation (NYSE:HEK), Waste Connections, Inc. (NYSE:WCN), Clean Harbors Inc (NYSE:CLH), Darling International Inc. (NYSE:DAR), and Progressive Waste Solutions Ltd (USA) (NYSE:BIN). This group of stocks are the members of the waste management industry and their market caps match CVA’s market cap.

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