Is Covanta Holding Corp (CVA) Worthy of Your Portfolio?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Covanta Holding Corp (NYSE:CVA).

Is Covanta Holding Corp (NYSE:CVA) ready to rally soon? The smart money seems to be taking a bearish view, as the number of long hedge fund bets that are revealed through the 13F filings declined by four last quarter. There were nine hedge funds in our database with CVA positions at the end of September. At the end of this article we will also compare CVA to other stocks including EXACT Sciences Corporation (NASDAQ:EXAS), Universal Forest Products, Inc. (NASDAQ:UFPI), and WPP PLC (ADR) (NASDAQ:WPPGY) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, we’re going to review the new action encompassing Covanta Holding Corp (NYSE:CVA).

How have hedgies been trading Covanta Holding Corp (NYSE:CVA)?

At the end of the third quarter, a total of nine funds tracked by Insider Monkey were long this stock, down by 31% from the second quarter of 2016. On the other hand, there were a total of 13 hedge funds with a bullish position in CVA at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Levin Capital Strategies, led by John A. Levin, holds the most valuable position in Covanta Holding Corp (NYSE:CVA). Levin Capital Strategies has a $97.7 million position in the stock, comprising 1.4% of its 13F portfolio. Coming in second is Renaissance Technologies, one of the largest hedge funds in the world, holding a $50.6 million position; 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors with similar optimism include Martin Whitman’s Third Avenue Management, D. E. Shaw’s D E Shaw, and Bernard Lambilliotte’s Ecofin Ltd. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually got rid of their positions entirely. It’s worth mentioning that Martin D. Sass’ MD Sass got rid of the biggest stake of the “upper crust” of funds monitored by Insider Monkey, totaling close to $9.3 million in stock. Eric Chen’s fund, Antipodean Advisors, also dumped its stock, about $3.3 million worth.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Covanta Holding Corp (NYSE:CVA) but similarly valued. We will take a look at EXACT Sciences Corporation (NASDAQ:EXAS), Universal Forest Products, Inc. (NASDAQ:UFPI), WPP PLC (ADR) (NASDAQ:WPPGY), and Evercore Partners Inc. (NYSE:EVR). This group of stocks’ market caps are similar to CVA’s market cap.

As you can see these stocks had an average of 19 funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $202 million in CVA’s case. EXACT Sciences Corporation (NASDAQ:EXAS) is the most popular stock in this table. On the other hand WPP PLC (ADR) (NASDAQ:WPPGY) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Covanta Holding Corp (NYSE:CVA) is even less popular than WPPGY. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: none