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Based in Fairfield, New Jersey, Covanta Holding Corporation (CVA) is a "Sam Zell" company -- the brilliant billionaire and entrepreneur owns 23 million shares of the company's stock. Covanta (formerly known as Danielson Holding Corporation) has a very bright future.

The company engages in waste disposal and energy production, and one of its main areas is turning waste to energy (it's also involved in independent power production and the creation and operation of infrastructure for water treatment, waste transfer, and other services). Covanta also has an insurance business based mainly in California.

Last year CVA acquired Affordable Residential Communities Inc. (ARC), a waste-to-energy company, and combined their operations. This led to a significant jump in revenues, and has also produced increased profits due to economies of scale. Even a slight dip in revenues and profits in the third quarter of 2006 led to earnings that exceeded analyst expectations, and CVA's stock has been climbing steadily since July.

As always, there are some risks to consider. CVA has been benefiting from NOL (net operating loss) carry forwards; the company has yet to be audited, but it's possible an audit could force the company to curtail its practice of carrying these losses forward, which might hurt the company's numbers. But even if this happens, I think it will just provide an opportunity to get the stock at a discount. CVA is a successful company operating in a growing industry, and I think this is one to grab and hold for a while.

Type of stock: A power and waste-disposal company whose revenue and income growth looks steady and very promising. Now that he has sold his real estate business, Sam Zell may focus even more of his attention on Covanta.

Price target: Currently above $21, CVA is pretty close to its 52-week high just below $23. The stock has been trending steadily upward since the summer. Personally, I think this is going to get above $25 during 2007, and it will be one to hold for at least a year or two, so if you grab it now, you won't regret it. Its results, however, tend to be lower in the first half of the year, so it's possible that you might see a drop in the stock price when it announces results in the first quarter of 2007.

CVA 1-yr chart:

CVA 1-yr chart

Source: Covanta Holding Corp.: One To Buy and Hold