Hedge Funds Are Piling Into Covanta Holding Corporation (CVA)

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Covanta Holding Corporation (NYSE:CVA).

Is Covanta Holding Corporation (NYSE:CVA) a healthy stock for your portfolio? The smart money was betting on the stock. The number of bullish hedge fund bets rose by 5 recently. Covanta Holding Corporation (NYSE:CVA) was in 26 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CVA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 21 hedge funds in our database with CVA positions at the end of the first quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Philip Hempleman of Ardsley Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s review the key hedge fund action regarding Covanta Holding Corporation (NYSE:CVA).

Do Hedge Funds Think CVA Is A Good Stock To Buy Now?

At Q2’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the first quarter of 2020. On the other hand, there were a total of 21 hedge funds with a bullish position in CVA a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, HG Vora Capital Management was the largest shareholder of Covanta Holding Corporation (NYSE:CVA), with a stake worth $96.9 million reported as of the end of June. Trailing HG Vora Capital Management was Electron Capital Partners, which amassed a stake valued at $48.1 million. Ardsley Partners, Royce & Associates, and Arosa Capital Management 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 HG Vora Capital Management allocated the biggest weight to Covanta Holding Corporation (NYSE:CVA), around 4.37% of its 13F portfolio. Harbert Management is also relatively very bullish on the stock, earmarking 3.84 percent of its 13F equity portfolio to CVA.

As aggregate interest increased, key hedge funds have jumped into Covanta Holding Corporation (NYSE:CVA) headfirst. Harbert Management, managed by Raymond J. Harbert, created the largest position in Covanta Holding Corporation (NYSE:CVA). Harbert Management had $6.9 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $6.8 million investment in the stock during the quarter. The other funds with brand new CVA positions are Farallon Capital, Cliff Asness’s AQR Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Covanta Holding Corporation (NYSE:CVA). We will take a look at Xperi Holding Corporation (NASDAQ:XPER), Revolution Medicines, Inc. (NASDAQ:RVMD), Trinseo S.A. (NYSE:TSE), Plains GP Holdings LP (NYSE:PAGP), Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA), XPEL Inc. (NASDAQ:XPEL), and Washington Federal Inc. (NASDAQ:WAFD). All of these stocks’ market caps resemble CVA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $154 million. That figure was $249 million in CVA’s case. Revolution Medicines, Inc. (NASDAQ:RVMD) is the most popular stock in this table. On the other hand Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) is the least popular one with only 2 bullish hedge fund positions. Covanta Holding Corporation (NYSE:CVA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CVA is 84.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on CVA as the stock returned 14.7% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.

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