Nexen Inc. (USA) (NYSE:NXY): Are Hedge Funds Right About This Stock?

Is Nexen Inc. (USA) (NYSE:NXY) a buy here? The best stock pickers are in a pessimistic mood. The number of long hedge fund positions retreated by 11 lately.

Nexen Inc. (USA) (NYSE:NXY)

According to most investors, hedge funds are assumed to be worthless, outdated financial vehicles of the past. While there are greater than 8000 funds trading at present, we choose to focus on the crème de la crème of this group, around 450 funds. It is widely believed that this group oversees the majority of the smart money’s total asset base, and by monitoring their top investments, we have come up with a number of investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outstripped 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 topped the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Just as key, optimistic insider trading activity is another way to parse down the world of equities. There are lots of incentives for an insider to sell shares of his or her company, but just one, very clear reason why they would behave bullishly. Various empirical studies have demonstrated the market-beating potential of this method if investors understand where to look (learn more here).

With all of this in mind, let’s take a glance at the recent action surrounding Nexen Inc. (USA) (NYSE:NXY).

Hedge fund activity in Nexen Inc. (USA) (NYSE:NXY)

At year’s end, a total of 52 of the hedge funds we track held long positions in this stock, a change of -17% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully.

According to our comprehensive database, John Paulson’s Paulson & Co had the biggest position in Nexen Inc. (USA) (NYSE:NXY), worth close to $687 million billion, accounting for 4.2% of its total 13F portfolio. Coming in second is Nick Niell of Arrowgrass Capital Partners, with a $478 million position; 17.5% of its 13F portfolio is allocated to the company. Some other hedge funds that hold long positions include D. E. Shaw’s D E Shaw, Thomas Steyer’s Farallon Capital and Richard Perry’s Perry Capital.

Because Nexen Inc. (USA) (NYSE:NXY) has faced a declination in interest from the aggregate hedge fund industry, it’s easy to see that there were a few funds who were dropping their full holdings last quarter. Interestingly, Kenneth Mario Garschina’s Mason Capital Management said goodbye to the largest stake of the “upper crust” of funds we key on, valued at an estimated $190 million in stock.. Frank Brosens’s fund, Taconic Capital, also cut its stock, about $152 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 11 funds last quarter.

How are insiders trading Nexen Inc. (USA) (NYSE:NXY)?

Insider trading activity, especially when it’s bullish, is best served when the company in question has experienced transactions within the past six months. Over the latest 180-day time frame, Nexen Inc. (USA) (NYSE:NXY) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

With the returns exhibited by the aforementioned time-tested strategies, everyday investors should always monitor hedge fund and insider trading activity, and Nexen Inc. (USA) (NYSE:NXY) is an important part of this process.

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Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.