Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Covanta Holding Corporation (NYSE:CVA).
Covanta Holding Corporation (NYSE:CVA) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that CVA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
At the moment there are a large number of formulas stock market investors put to use to size up publicly traded companies. A duo of the most useful formulas are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass the market by a very impressive margin (see the details here).
Bernard Lambilliotte of Ecofin Ltd
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the new hedge fund action regarding Covanta Holding Corporation (NYSE:CVA).
What does smart money think about Covanta Holding Corporation (NYSE:CVA)?
At Q4’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in CVA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Levin Capital Strategies held the most valuable stake in Covanta Holding Corporation (NYSE:CVA), which was worth $34.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $25.1 million worth of shares. Ecofin Ltd, GLG Partners, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ecofin Ltd allocated the biggest weight to Covanta Holding Corporation (NYSE:CVA), around 9.34% of its 13F portfolio. Levin Capital Strategies is also relatively very bullish on the stock, designating 3.47 percent of its 13F equity portfolio to CVA.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. GLG Partners, managed by Noam Gottesman, assembled the biggest position in Covanta Holding Corporation (NYSE:CVA). GLG Partners had $4.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $2.7 million position during the quarter. The other funds with brand new CVA positions are Ali Motamed’s Invenomic Capital Management, Israel Englander’s Millennium Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s check out hedge fund activity in other stocks similar to Covanta Holding Corporation (NYSE:CVA). These stocks are Xencor Inc (NASDAQ:XNCR), Redfin Corporation (NASDAQ:RDFN), Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), and ProAssurance Corporation (NYSE:PRA). This group of stocks’ market valuations match CVA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XNCR | 16 | 107347 | 2 |
| RDFN | 15 | 140093 | -1 |
| MNTA | 33 | 553006 | 15 |
| PRA | 18 | 189428 | 3 |
| Average | 20.5 | 247469 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $106 million in CVA’s case. Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) is the most popular stock in this table. On the other hand Redfin Corporation (NASDAQ:RDFN) is the least popular one with only 15 bullish hedge fund positions. Covanta Holding Corporation (NYSE:CVA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately CVA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CVA investors were disappointed as the stock returned -47% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
