Here is What Hedge Funds Think About Talisman Energy Inc. (USA) (TLM)

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Is Talisman Energy Inc. (USA) (NYSE:TLM) a bargain? Hedge funds are in an optimistic mood. The number of long hedge fund positions advanced by 4 lately.

Talisman Energy Inc. (USA) (NYSE:TLM)If you’d ask most traders, hedge funds are seen as underperforming, outdated investment vehicles of the past. While there are more than 8000 funds trading at the moment, we choose to focus on the crème de la crème of this club, about 450 funds. It is widely believed that this group controls the majority of the hedge fund industry’s total asset base, and by tracking their best equity investments, we have discovered a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as important, optimistic insider trading sentiment is a second way to break down the investments you’re interested in. There are many motivations for an upper level exec to cut shares of his or her company, but just one, very clear reason why they would buy. Several academic studies have demonstrated the useful potential of this tactic if shareholders understand where to look (learn more here).

Now, let’s take a gander at the recent action encompassing Talisman Energy Inc. (USA) (NYSE:TLM).

Hedge fund activity in Talisman Energy Inc. (USA) (NYSE:TLM)

In preparation for this quarter, a total of 22 of the hedge funds we track were long in this stock, a change of 22% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably.

When looking at the hedgies we track, West Face Capital, managed by Greg Boland, holds the largest position in Talisman Energy Inc. (USA) (NYSE:TLM). West Face Capital has a $100.1 million position in the stock, comprising 18.3% of its 13F portfolio. On West Face Capital’s heels is Senator Investment Group, managed by Doug Silverman and Alexander Klabin, which held a $91.9 million position; 1.1% of its 13F portfolio is allocated to the company. Other hedge funds that hold long positions include Steven Cohen’s SAC Capital Advisors, Michael A. Price and Amos Meron’s Empyrean Capital Partners and Jonathon Jacobson’s Highfields Capital Management.

Now, key hedge funds were breaking ground themselves. Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, created the most outsized position in Talisman Energy Inc. (USA) (NYSE:TLM). Empyrean Capital Partners had 39.1 million invested in the company at the end of the quarter. Jonathon Jacobson’s Highfields Capital Management also initiated a $31.7 million position during the quarter. The other funds with new positions in the stock are Doug Silverman and Alexander Klabin’s Senator Investment Group, Patrik Brummer’s Zenit Asset Management AB, and Abby Flamholz and Yehuda Blinder’s ADAR Investment Management.

What do corporate executives and insiders think about Talisman Energy Inc. (USA) (NYSE:TLM)?

Insider purchases made by high-level executives is best served when the company in question has experienced transactions within the past 180 days. Over the last half-year time period, Talisman Energy Inc. (USA) (NYSE:TLM) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Talisman Energy Inc. (USA) (NYSE:TLM). These stocks are Cabot Oil & Gas Corporation (NYSE:COG), Cobalt International Energy, Inc. (NYSE:CIE), Chesapeake Energy Corporation (NYSE:CHK), Range Resources Corp. (NYSE:RRC), and Southwestern Energy Company (NYSE:SWN). All of these stocks are in the independent oil & gas industry and their market caps are similar to TLM’s market cap.

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