The financial regulations require hedge funds and wealthy investors that crossed the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on June 28th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Covanta Holding Corporation (NYSE:CVA) based on those filings.
Is Covanta Holding Corporation (NYSE:CVA) ready to rally soon? Money managers are becoming less hopeful. The number of long hedge fund positions were trimmed by 3 lately. Our calculations also showed that CVA isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to check out the key hedge fund action surrounding Covanta Holding Corporation (NYSE:CVA).
How have hedgies been trading Covanta Holding Corporation (NYSE:CVA)?
At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CVA over the last 16 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Levin Capital Strategies, managed by John A. Levin, holds the most valuable position in Covanta Holding Corporation (NYSE:CVA). Levin Capital Strategies has a $43 million position in the stock, comprising 4.2% of its 13F portfolio. On Levin Capital Strategies's heels is Renaissance Technologies, with a $24.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism comprise Bernard Lambilliotte's Ecofin Ltd, John Overdeck and David Siegel's Two Sigma Advisors and Mario Gabelli's GAMCO Investors.
Since Covanta Holding Corporation (NYSE:CVA) has witnessed declining sentiment from hedge fund managers, we can see that there is a sect of fund managers who were dropping their full holdings heading into Q3. Interestingly, David Costen Haley's HBK Investments sold off the biggest stake of all the hedgies monitored by Insider Monkey, worth an estimated $1.9 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund said goodbye to about $1.2 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 3 funds heading into Q3.
Let's also examine hedge fund activity in other stocks similar to Covanta Holding Corporation (NYSE:CVA). These stocks are Canada Goose Holdings Inc. (NYSE:GOOS), Alamos Gold Inc (NYSE:AGI), Sunrun Inc (NASDAQ:RUN), and Cactus, Inc. (NYSE:WHD). All of these stocks' market caps match CVA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GOOS,18,109012,-9 AGI,12,168949,0 RUN,17,498057,2 WHD,24,210166,-3 Average,17.75,246546,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $103 million in CVA's case. Cactus, Inc. (NYSE:WHD) is the most popular stock in this table. On the other hand Alamos Gold Inc (NYSE:AGI) is the least popular one with only 12 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -2.1% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.