Midday Commentary: Covanta gains on back of Barron's article; Volcano convertibles in focus

By Rebecca Melvin

New York, Nov. 4 - Covanta Holding Corp.'s convertibles jumped in early action Monday, and shares of the Fairfield, N.J.-based waste disposal and renewable energy company were also higher after a positive article in Barron's on Sunday that said the company is likely to keep growing because revenue is secured by long-term contracts and barriers to entry in the sector are high, a convertibles analyst said.

Covanta Holding's 3.25% convertibles due June 1, 2014 jumped to 119 bid, 120 offered early Monday from about 115. The Covanta convertible had skidded as much as 20 points a week-and-half ago, touching 112 after the company lowered guidance.

Covanta shares were up 81 cents, or 4.7%, at $18.22 early Monday.

According to the article, barriers to entry in the waste-to-energy business are high and the company has a guaranteed revenue stream due to its long-term contracts, which are factors that are likely to keep the company growing for years.

Guidance was lowered Oct. 23, with the company citing slower-than-expected organic growth, lower-than-expected steam demand and unscheduled outages. But at that time, the company also said positive developments included a 20-year New York City waste contract and the acquisition of a Camden, N.J.-based energy-from-waste facility.

Volcano Corp.'s 1.75% convertible due 2017 looked to be up nearly a point at 97 plus, according to Trace data early Monday.

The San Diego-based medical-device maker has caught the attention of activist investor Glenn Welling, and his investment vehicle Engaged Capital LLC has taken a 5.1% stake in the company.

Volcano shares jumped about $1.00, or 5.5%, to near $20.00 in early trading.

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