Third Point Wins (Set to the Beat of \'90s Hip-Hop)

The hedge fund manager Daniel S. Loeb, who sits atop nearly $10 billion at his Third Point, is having a better year than most hedge funds - in part because of bets on Greece.

In his quarterly letter to investors, Mr. Loeb says that strategic positions in the debt of the shaky nation and other European credit have generated a 35 percent return on invested money over the last six months. That is contributing to year-to-date performance of about 11 percent for Third Point's offshore fund. The fund did so by nearly tripling its investments in the region, which in addition to going long on Greek bonds also included those of Portugal.

Mr. Loeb, quoting the deceased rapper Tupac Shakur, puts his strategy for distressed Europe simply: “I'm trying to make a dollar out of fifteen cents.”

Mr. Loeb is said to know the song “Keep Ya Head Up” by heart. (Hip-hop fans will recall the line was also used around the same time by Digital Underground's Shock G, a k a Humpty, in Tupac's “I Get Around”).

“We often make money in situations where our assumptions are not rosy, but less draconian than those of a market in panic,” he writes in the letter.

Buried in the letter, too, is a new long position for the hedge fund: Murphy Oil Corporation. The roughly $10.4 billion company, currently trading near $52 a share, is undervalued by as much as 60 percent, Mr. Loeb says.

Third Point invested in the company after seeing that Murphy's price was down 15 percent over a three-year period even as oil and gas indexes appreciated by about 49 percent, he writes.

Keeping the company from tapping its potential is a complex and cumbersome business, with an exploration and production segment, a refining business and a retail and marketing operation. And then there is the belief of Third Point that the company, which is a family business, is also stuck in the past.

That is evidenced, in part, by “management's decisio n to repeatedly delay spinning off its retail business,” which could be worth as much as $12 to $14 a share, he says.

“At this point, it appears sentimental attachment by management and the Murphy family is driving a stubborn desire to hold onto these and other non-strategic assets, creating a significant drag on enterprise value,” he writes.

In addition to spinning off the retail business, the fixes include selling the firm's roughly 145,000 acres of Canadian natural gas land, selling its 5 percent stake in the Syncrude Oil Sands project and finishing an exit from its refining business.

Murphy Oil did not immediately respond to a request for comment.

If the point by point guide wasn't clear, Mr. Loeb outright suggested he might go activist on the company. But not before offering another musical blast from the past. Known for a sharp, if peculiar, wit, Mr. Loeb quotes Boyz II Men's 1992 Hit “End of the Road.”

There reference, a not-so- subtle dig at management's inability to relinquish certain assets, goes: “Although we've come to the end of the road/ still I can't let you go.”