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The Morning Brief: Eminence Capital Takes Men’s Wearhouse Stake

Another hedge fund has taken a major stake in a retailer. Ricky Sandler’s Eminence Capital on Thursday disclosed that it owns 9.8 percent of The Men’s Wearhouse. The firm made the disclosure in a 13D filing, suggesting the position is an activist stake. Remember, on September 18, Jos. A. Bank Clothier offered to acquire Men’s Wearhouse for $48 per share in cash, a 42.4 percent premium over the previous day’s closing price. On October 9, Men’s Wearhouse rejected the offer. In his filing, Sandler said that on November 7, he sent a letter to the company’s board expressing disappointment in its response to the proposal. Sandler said his firm thinks the board’s fiduciary duties require that they immediately instruct their financial advisors to evaluate all strategic alternatives available to the issuer and enter into a dialogue with Jos. A. Bank regarding a possible merger. “We intend to exercise our rights as shareholders to hold you accountable if you fail to take these actions by close of business on November 11,” Sandler writes in the letter, which also expresses displeasure with Men’s Wearhouse CEO Doug Ewert’s failure to return his November 4 phone call.

The average hedge fund rose 1.5 percent in October, according to a pair of hedge fund databases. This was the second best month of 2013, according to eVestment, which calculates the year-to-date gain for the average hedge fund at 7.1 percent. HFR says it is closer to 7.2 percent. But who’s quibbling? At this point, 2013 is shaping up to be the best year for long-short equity funds since 2009 and second best since 2006, when these funds returned 26.7 percent and 15.3 percent, respectively, according to eVestment. Macro funds enjoyed their second consecutive strong month and their best since January.

It looks like Paulson & Co., Blackstone Group and Centerbridge Partners will nearly triple their investment when Extended Stay America Inc. goes public next week, according to a Bloomberg report.

Elliott Associates’ Elliott International fund reported that it owns 11.68 percent of German drug distributor Celesio, which is the target of an $8.3 billion takeover offer from McKesson. New York-based Elliott, founded by Alpha Hall of Famer Paul Singer, is known for taking these types of large arbitrage positions.

Deutsche Bank raised its price target on American International Group, a major hedge fund favorite, at the end of the second quarter, to $58 from $56. It is looking for a “healthy double-digit” gain in the stock, according to a note sent to clients on Thursday. Earlier this month, shares of AIG plunged more than 6 percent after it reported quarterly results that were disappointing to some investors. The stock had the most number of hedge funds counting it among their top-10 holdings at the end of the second quarter.

Investors took some profits in the surging shares of Microsoft. The stock fell 1.74 percent to $37.51.

Shares of Green Mountain Coffee Roasters dropped to their lowest level since May 7, closing Thursday at $58.17, down nearly 3 percent. The stock, a major short position for David Einhorn’s New York-based firm Greenlight Capital, is now down about 33 percent from its high.

Another favorite hedge fund stock, Priceline.com, experienced volatile after-hours trading after reporting strong results for the third quarter. The company was interpreted by some as providing a somewhat disappointing fourth-quarter outlook. The stock initially sank, then moved into positive territory before falling back and straddling the break-even point. The online travel services company also announced it will split the roles of the chief executive officer and chairman. The stock closed down more than 3 percent in the regular trading session.

Shares of Groupon plunged by a double-digit percentage in after hours trading after revenues came in short of expectations. The stock closed 5 percent in the regular trading session.

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