It's not a household name like Yahoo, but Daniel Loeb, the founder of hedge fund Third Point, called the oil and gas conglomerate an undervalued stock. In his third quarter letter to investors, Loeb outlined a case where the stock could pop if management chose to sell certain assets and spin off others.
Like Yahoo, Murphy Oil's shares have languished over the past several years. Loeb said his plan for the company could unlock enough value to push shares to $91 to $94 a share, more than 50% higher than its current price. Loeb's plan for the company included spinning off its retail fuel business with 1,100 filling stations; selling its natural gas assets in Canada and its 5% stake in Syncrude Canada, a synthetic crude oil producer.
On Thursday, Murphy Oil responded with a statement, noting that its board and management had met with Third Point and other shareholders and would continue to weigh options to "illuminate the value in our stock price."
Loeb has become known for getting his way and waging very public battles with companies resistant to his wishes. When Yahoo's management opposed Third Point's nominations to its board, Loeb was able to successfully get the search engine's then-CEO Scott Thompson ousted by discovering that he lied on his resume.
So far, Loeb's involvement has forced major organizational changes at Yahoo but has generated minimal returns for investors. Its stock is flat this year.
Still, Loeb's $9.3 billion fund is beating its hedge fund peers. Third Point's main fund is up 11% for the year, according to the company's third quarter letter. Hedge funds overall are up about 7% this year.
That might not be enough to satisfy Loeb, however. He is said to be fiercely competitive with hedge fund manager David Einhorn, who's been deemed something of a prophet for his ability to detect deteriorating stocks. And Loeb's 11% return trails Einhorn's Greenlight Capital, which has generated 13% returns for investors so far this year.
Beyond Murphy Oil, Loeb called AIG (AIG) another stock with significant upside, even after jumping more than 50% this year. Loeb said Third Point is invested in AIG for the long-term. "We were not renters," Loeb wrote in his letter. Additionally, Loeb wrote that AIG will have many more options once the Treasury sells its remaining stake, calling that the "critical catalyst" for the company. With the "overhang of Treasury ownership," Loeb said that AIG initiate a dividend or initiate a bonus structure to incentivize management.
Loeb's other top performing investments in the third quarter: Apple (AAPL), gold and a stake in the not-yet public Ally Financial, another tarnished relic of the financial crisis that's been looking shinier as of late.
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